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1、CHAPTER20Long-TermDebtInitsbasicform,abondisasimplefinancialinstrument.feature.BondbuyerswererequiredtomakeinterestYoulendacompanysomeamount,say$10,000.ThepaymentstoBerkshireHathawayfortheprivilegeofcompanypaysyouinterestonaregularbasis,anditowningthebonds,andth
2、einterestpaymentshadtorepaystheoriginalloanamountof$10,000atsomebemadeupfront!Furthermore,ifyoupaid$10,663.63pointinthefuture.Butbondscanalsohaveunusualforoneofthesebonds,BerkshireHathawaypromisedcharacteristics.Forexample,in2002,Berkshiretopayyou$10,000infiveye
3、ars.DoesthissoundlikeHathaway,thecompanyrunbylegendaryinvestoragooddeal?Investorsmusthavethoughtitdid;theyWarrenBuffett,issuedsomebondswithasurprisingbought$400millionworth!20.1Long-TermDebt:AReviewLong-termdebtsecuritiesarepromisesbytheissuingfirmtopayinteresta
4、ndprincipalontheunpaidbalance.Thematurityofalong-termdebtinstrumentreferstothelengthoftimethedebtremainsoutstandingwithsomeunpaidbalance.Debtsecuritiescanbeshort-term(maturitiesofoneyearorless)orlong-term(maturitiesofmorethanoneyear).1Short-termdebtissometimesr
5、eferredtoasunfundeddebtandlong-termdebtasfundeddebt.2Thetwomajorformsoflong-termdebtarepublicissueandprivatelyplaceddebt.Wediscusspublic-issuebondsfirst,andmostofwhatwesayaboutthemholdstrueforprivatelyplacedlong-termdebtaswell.Themaindifferencebetweenpubliclyiss
6、uedandprivatelyplaceddebtisthatprivatedebtisdirectlyplacedwithalendinginstitution.Therearemanyotherattributestolong-termdebt,includingsecurity,callfeatures,sinkingfunds,ratings,andprotectivecovenants.Thefollowingtableillustratesthefeaturesforabondrecentlyissued
7、byCiscoSystems,Inc.1Inaddition,peopleoftenrefertointermediate-termdebt,whichhasamaturityofmorethanoneyearandlessthanthreetofiveyears.2Thewordfundinggenerallyimplieslong-term.Thus,afirmplanningtofunditsdebtrequirementsmaybereplacingshort-termdebtwithlong-termdebt.
8、580ros05902_ch20.indd5809/25/0611:45:55AMChapter20Long-TermDebt581FeaturesofaCiscoSystems,Inc.,CompanyBondTermExplanationAmountofissue$3billionThecompanyissued$3billionworth
