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    Stocks and bonds

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    I have to answer the questions below in 300 words. I have been reading the chapter and don't fully understand these questions:

    Discuss how stocks and bonds differ. Include the key differences between them. Why might an organization choose one versus the other as a long-term financing instrument?

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    Solution Preview

    Stocks and bonds differ in the following ways
    1. Stock represents ownership while bonds represent debt
    2. Bond financing needs to be repaid at maturity while stock amount stays with the company
    3. Bonds may require periodic payment of interest while the payment of dividends on stock is not necessary
    4. Stocks provide the stockholders to vote in the affairs of the company which is not available to bondholders
    5. Interest paid on bonds is tax deductible, while dividends are to ...

    Solution Summary

    The solution explains the difference between stocks and bonds.