| a written acknowledgment of a debt, esp. an informal one consisting only of the letters IOU, the sum owed, and the debtor's signature. |
IOU  (ī'ō-yōō')  n. A promise to pay a debt, especially a signed paper stating the specific amount owed and often bearing the letters IOU. [From the pronunciation of I owe you.] |
IOU
An abbreviation of the phrase "I owe you."
Investopedia Commentary
An IOU in the business community is actually a legally binding agreement between a borrower and a lender. The terms of the loan are set out in a contract, and, once it's signed, the two parties must abide by the terms of the contract or face legal repercussions. For example, when a corporation issues bonds, it is in essence issuing an IOU to bondholders. The IOU or bond contract sets out the terms, including the principal that will be owed, the interest that will be paid, and the time at which these payments will occur.
Related Links
Bond Basics Tutorial
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Corporate Bonds: An Introduction To Credit Risk
See also: Bond, Bond Rating, Corporate Bond, Coupon, Default, Default Risk, Junk Bond, Maturity Date, Principal
| IOU a note of debt (from "I owe you") |