--%>
Assignment Help - homework help

The financial investor about bonds

Describe three ways to finance corporate activity.  Make a case that stocks are more risky for the financial investor than are bonds?

E

Expert

Verified

There are three ways to finance corporate activity: it can be done internally out of undistributed profits or Corporations can borrow from financial institutions or issue their own stocks or bonds.

Common stock is an ownership share in a corporation that gives a holder voting rights and a share of dividends. Bonds are promissory notes where the corporation promises to pay the holder a fixed amount in the future plus annual interest on the loan.  A bondholder is not an owner, only a lender.  Stocks are usually riskier than bonds. Bondholders have a “legally prior claim” against corporate earnings.  Stock dividends cannot be paid until all interest payments due to bondholders are paid.  Interest is guaranteed as long as the company is healthy, whereas dividend depends on profits.

   Related Questions in Business Economics

  • Q : The market system not only accepts

    Explain the statements: The market system not only accepts self-interest as a fact of human existence.

    		•
  • Q : Checkout problem A grocery store chain

    A grocery store chain is considering ways to improve the performance of the waiting lines at their checkout stands. A heavily trafficked checkout stand is monitored for 120 min. In that period, 60 customers have their groceries rung up, and depart from the store. The

    		•
  • Q : Elucidate the ways to finance corporate

    Elucidate the ways to finance corporate activity?

    		•
  • Q : Illustrate the characteristics of the

    Illustrate the characteristics of the Market System?

    		•
  • Q : Limitations of activities to generate

    Illustrations of activities which generate negative externalities would not comprise: (w) burning coal that results in acid rain. (x) smoking a cigar at the opera. (y) killing fish by dumping sewage into a river. (z) being inoculated against a contagi

    		•
  • Q : Theory of Purchasing Power Parity

    Question: The Theory of Purchasing Power Parity says that, in the long run, nominal exchange rates change to offset changes in relative i. _________________________ so that the purchasing power of two currencies st

    		•
  • Q : Economics as a science Economics as a

    Economics as a science:We no longer ask the problem whether economics is an art or a science. Science is a systematized body of knowledge. Merely as physics and chemistry are sciences, econo

    		•
  • Q : Define Operating income approach

    Describe briefly Operating income approach?

    		•
  • Q : Restriction of laissez-faire government

    A laissez-faire government is restricted to finding: (1) property rights within a simple fashion and to enforcing private contracts. (2) market prices which guarantee equitable resource allocations. (c) how resources will be allocated efficiently. (4)

    		•
  • Q : Market Apparent program For the

    For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gi

    		•