Name: Introduction to bonds | Stocks and bonds | Finance & Capital Markets | Khan Academy
Uploaded: 2017-01-22T06:14:00.000Z
Duration: 8 min 42 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

I want to give you a general idea of what a bond is

Let's say just for the sake of simplicity,

so all of that value, all of that $10 million

And if we had, let's say, a million shares.

and if we believe this $10 million number,

that implies that each share is worth $10 per share.

Now let's say this company is doing really well

It wants to increase its assets by $5 million

so it can go out and buy a $5 million factory,

Well, one way is they could just issue more equity.

If they're able to get a price of $10 per share,

They issue 500,000 shares at $10 a share.

but these new owners gave them, collectively,

so this, the equity would grow by $5 million.

and that new money from these new shareholders

What I just described is essentially issuing equity,

I'll leave this up here just so we can compare the two.

Once again, we have $10 million of assets.

We have $10 million of equity to start off with,

and instead of issuing stock to get the $5 million,

so we could, we're essentially issuing debt,

we essentially could go to a bank and say,

and the bank would give us $5 million of cash

that we can then go use to buy our factory.

the asset side of our balance sheet looks identical

or the assets of the company are identical.

I was able to raise that money by increasing

that I have to split the profits of this company with.

I was able to raise the money by borrowing it.

The people that I'm borrowing this money from,

the people that I'm borrowing this money,

They don't get a cut of the profits of this company.

Subtitles ListPlay Video

Introduction to bonds | Stocks and bonds | Finance & Capital Markets | Khan Academy

entire

scenario

essentially

bunch