What Is The Difference Between Stocks And Bonds?

Which represents more risk to the company? Why?


This entry was posted on Thursday, February 4th, 2010 at 1:16 pm and is filed under stocks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

6 Responses to “What Is The Difference Between Stocks And Bonds?”

  1. Stocks represent ownership. If you buy stock in a company, you own a small piece of it. A bond is simply a loan. If you buy a bond, you are giving some corporation a loan that they will pay back with some interest.
    Bonds are not risky as they have a set payment schedule so there are no suprises. There is no such guarantee with stocks.

  2. STOCK MEANS -SHAREHOLDING IN COMPANY
    BONDS MEANS LOAN GIVEN TO COMPANY

  3. The difference between stocks and bonds is the difference between debt and ownership. Bonds are a uniform share of a public indebtedness. Stocks are a uniform share of public ownership. Debt is traditionally incurred to help the company have more money to do what the company needs to do. The stockholders fed money into the company and the creditors feed money or things of value into the company. The total value of this is the asset base. On the other, balancing, side of the balance sheet is who owns those assets. A dollar value for debt is in the liabilities and the balance after indebtedness, the equity, is due to the stockholders. The risks of the company’s profitability are held by the stockholders, because if the company had to fold and sell its property in dissolution, the debtors get paid completely before the stockholders get a dime. Of course, the terms of the debts are often judged by the creditors by the ability of the company to repay those debts. The creditors then see the risk in the company’s management and operations of its business.

  4. Bonds are basically loans / debt the company takes on.
    Stocks are a % share in the owner ship of the company .
    Stocks are traded by 3rd party people via brokers and the company has no literal obligation to them , but they try to make the business successful because management is often compensated in shares.

  5. A bond is a certificate acknowledging a debt and the amount of interest to be paid each year until repayment. You will not lose money by buying bonds. Over time one will get the money back or even more depending upon the type of bond. Stocks however will make you the most money and in a shorter amount of time. But the risk is great. There is a chance that stock holders will lose a lot of money if their stock is not doing well. Bonds are meant to go back to purchase value while stocks could potentially go down below the purchase value in turn making the owner lose money.

  6. From a company’s point of view, a bond is potentially more risky. I say potentially because there are several bond types and volumes of legal issues involved. The most common bonds have some type of repayment guarantee of at least the initial investment, so an investor might not make money but wont loose any as well. Common stock ownership holds no such guarantee. A company could come under financial hardship and loose all of its market (stock) value with no legal requirements to repay the stock holders but still be legally required to repay any outstanding bonds.

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