Answered: What is the difference between stocks…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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What is the difference between stocks and bonds?

Expert Solution

Step 1 Difference between the stock and bonds

Particulars	Stock	Bond
Type	Equity	Debt
Ownership	Ownership of the company is vested in stocks	While bonds don't give the right to the bondholder to have ownership in the company
Return	Stockholders get dividends from the company as a form of return	Bondholders get coupons or interest as a form of return
Priority of Repayment	Stocks have the last priority of repayment in case of liquidation	Bonds will get paid before the stockholders
Fixed Return	Dividends are not fixed	Interest rate is fixed
Payments in case of loss	Dividends aren't paid when the company is in loss	The interest has to be paid even though there has been a loss
Voting Right	Stocks have voting rights	Bonds don't have voting rights
Secondary Market	It is strong for public listed stocks	Weak for Bonds
Tenure	Stocks don't have a fixed tenure	Bonds have a fixed tenure

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