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Stocks vs. Bonds

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What is the difference between stocks and bonds? Which represents more risk to the company? Why?

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Solution Summary

This response compares stocks and bonds and the risks associated to each.

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Hi,
A stock is a type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings.

There are two main types of stock: common and preferred. Common stock usually entitles the owner to vote at shareholders' meetings and to receive dividends. Preferred stock generally does not have voting rights, but has a higher claim on assets and earnings than the common shares. For example, owners of preferred stock receive dividends before common shareholders and have priority in the event that a company goes bankrupt and is liquidated.

They are also known as "shares" or "equity". A holder of stock (a shareholder) has a claim to a ...

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