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Finance GlossaryBonds
Bonds
Definition of Bonds
Bonds are fixed income securities issued in exchange for a loan, generally by governments and corporations. A bond will generate a fixed interest rate on top of the principal across a fixed time period.
A bond market is a place where bonds are issued, bought, and sold. Bonds are issued in exchange for a loan generally by governments and corporations.
The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:
The quality of a bond can be understood by its credit rating, which is nothing but the creditworthiness of the company issuing it. The best bonds in India are known to have the following credit rating:
- SOV: Only for government bonds
- AAA: Highest
- AA+: High-medium
- A+: Upper-medium
- BBB+: Lower-medium
- BB+: Speculative
- B+: Highlight speculative
- CCC+: Risky
- CC: Extremely risky
Related Terms
Total Shareholder Return (TSR)
Total Shareholder Return (TSR) measures the overall return generated for investors, combining share price appreciation and dividends received over a period. It provides a more complete view of performance than price returns alone. TSR is commonly used to evaluate long-term value creation and management effectiveness.
Go Public
To “go public” or going public means to get listed on the stock market by launching an Initial Public Offering (IPO). The act of going public involves receiving approval from existing stakeholders to launch an IPO, the price of which is decided by two methods:
- Book Building
- Fixed price
Once the price of the IPO is decided, the shares are offered to the public on the primary market. Not everyone who applies to an IPO may get shares - the system works on the basis of allotment. After the shares are issued, the company is said to move from the “go public” stage to the publicly traded company stage.
Carrying Charge
Carrying charge or cost of carry is the money involved in the upkeep or general holding of an asset or financial instrument. Examples of carrying charges include maintenance costs, insurance, and others.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
A carrying charge can increase the cost of owning an asset. At times, the cost of carry may exceed the potential returns, in which case an investor must evaluate whether the asset is worth keeping.
Illiquid Asset
An illiquid asset is something of value that can not be exchanged for cash easily. Although an illiquid asset may have value, you will not be able to find buyers for it readily. As a result, illiquid assets are typically sold at a significant discount or worse, lose value and expire.
Reverse Stock Split
A reverse stock split is a corporate action that involves a company reducing the number of outstanding shares it has, while the stock price increases proportionately. For instance, if there is a 1:5 reverse split, five shares are combined into one. A reverse stock split does not change the value of a company. However, it is often used to meet the requirements of listing on an exchange or improve the perception in the market.
Capital Gains Exemption
Capital gains exemption is the tax break that a government offers on profits earned by selling assets. Generally, an investor must pay a tax on the short-term capital gains or long-term capital gains earned.
But in certain cases, the government allows investors to offset taxes. For example, if an investor sells property and reinvests the entire amount back again into another property, they can avail of capital gains exemption.
But in certain cases, the government allows investors to offset taxes. For example, if an investor sells property and reinvests the entire amount back again into another property, they can avail of capital gains exemption.
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