--%>
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 : Decentralized a virtue of capitalism

    The idea which a virtue of capitalism is decentralized its decision making emerged while: (1) social philosophers looked for alternatives to feudal kings like economic regulators. (2) Russian imperialism fostered anti-communist sentiment after World W

    		•
  • Q : Introduction of the term Cost Principle

    Give a brief introduction of the term Cost Principle ?

    		•
  • Q : Wealth of Nations - pioneering survey

    The Wealth of Nations that a pioneering survey of economic treated was published within: (1) 1849 year, and written by Karl Marx. (2) 1936 year, and written by John Maynard Keynes. (3) 1776 year, and written by Adam Smith. (4) 141 BC,

    		•
  • Q : Specialization in division of labor I

    I have a problem in economics on Specialization in division of labor. Please help me in the following question. Jennifer writing computer code whereas Melissa handles the business features of Econo-Software would be an illustration of specialization i

    		•
  • Q : Introduction of the term Cost of capital

    Give a brief introduction of the term Cost of capital?

    		•
  • Q : Forcast 9. The following table shows

    9. The following table shows annual sales data for Stuff Happens, Inc., over the ten-year 1998-2008 period: Year Sales ($ Millions) 1998 $2.0 1999 2.2 2000 2.4 2001 2.6 2002 2.8 2003 3.0 2004 3.2 2005 3.5 2006 3.8 2007 4.1 2008 4.3 A. Calculate the 1998-2008 growth rate in sales using

    		•
  • Q : Describe unanticipated inflation

    Describe unanticipated inflation?

    		•
  • Q : Factors of account since the Second

    For rapid growth of world trade what are the factors of account since the Second World War?

    		•
  • Q : What is the opportunity cost of

    What is the opportunity cost of attending college?  In 2000, nearly 80% of college-educated Americans held jobs, whereas only about 40% of those who did not finish high school held jobs.  How might this difference relate to opportunity costs?

    		•
  • Q : Illustrate Scarcity and choice of

    Illustrate Scarcity and choice of Economic Perspective?

    		•