--%>
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 : Decomposition of Private Sector Can

    Can someone help me in finding out the right answer from the given options. The private sector is decomposed into: (1) Businesses and investors. (2) Households and stockholders. (3) Households and investors. (4) Businesses and households.

    		•
  • Q : Describe the types of multiplant firms

    Describe the types of multiplant firms?

    		•
  • Q : Determine the monetary prices while

    Dividing monetary prices from each other yields: (v) nominal prices. (w) relative prices. (x) subjective prices. (y) absolute prices. (z) transaction prices. Hello guys I want your advice. Please recommend some vie

    		•
  • Q : How do households dispose of their

    How do households dispose of their income?

    		•
  • Q : Enterprise is dictated primarily by

    “The legal form an enterprise assumes is dictated primarily by the financial requirements of its particular line of production.”  Do you agree?

    		•
  • Q : Resource market for economic capital

    Janet has loaned a start-up coffee house $50,000 and predicts to earn interest from her financial investment. In circular flow model this transaction is an illustration of: (1) An exchange of her saving for interest, via a resource market for the economic capital. (2)

    		•
  • 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 : Inefficiencies and inequities by

    An employer that exaggerates the safety of a position or the prospects for advancement to job applicants makes inefficiencies as well as arguable inequities due to: (1) signaling. (2) credentialism. (3) screening. (4) adverse selection. (5) a moral hazard.

  • Q : Problem on Legislature budget XY School

    XY School District has a large number of students in need of remedial instruction. The superintendent of XY School System can allocated her budget between purchasing X units of remedial instruction at a price of $2,000/unit and spending an amount ($Y) on all other sch

    		•
  • Q : Innate psychological attributes of

    As illustrated by Adam Smith that there are two innate psychological attributes of humans. One is which people have a powerful wish to better their individual circumstances. The other is as human beings so we are: (1) more interested

    		•