Bonds Payable
Refers to the long-term debt a company owes to its bondholders and must repay at a specified maturity date, typically more than one year from the balance sheet date.
When a company issues bonds, it effectively borrows money from investors who become creditors holding the company's debt. The bonds payable account on the balance sheet represents this financial obligation that the company is committed to honoring. Each bond has specific terms, including the principal amount (the face value), the coupon rate (interest to be paid), and the maturity date. Interest on these bonds is usually paid semiannually, and upon the maturity date, the issuer is obliged to repay the principal amount to the bondholders.
Bonds payable are a critical aspect of a company’s capital structure and financial management, providing a means to secure large sums of capital for business expansions, acquisitions, and other substantial investments. Understanding how bonds payable affect a company's financial leverage and interest expenses is essential for investors and stakeholders who seek to evaluate the company's financial stability, risk profile, and debt management strategies.
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