How Do Stocks And Bonds Differ

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How Do Stocks And Bonds Differ

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Stocks: 1. All corporations issue or offer to sell stock. That act is what makes them corporations. 2. Stocks represent ownership. 3. Stocks do not have a fixed dividend rate (except preferred stocks) 4. Dividends on stock are paid only if the corporation makes a profit. 5. Stocks do not have a maturity date. The corporation issuing the stock does not repay the stockholder. 6. Stockholders (except those with preferred stock) can elect a board of directors who control the corporation. 7. Stockholders have a claim against the property and income of a corporation only after the claims of all creditors (including bondholders and holders of preferred stock) have been met. Bonds: 1. Corporations are not required to issue bonds. 2. Bonds represent debt. 3. Bonds pay a fixed rate of interest. 4. Interest on bonds normally must always be paid, whether or not the corporation earns a profit. 5. Bonds have a maturity date. The bondholder is to be repaid the value of the bond, although if the corporation goes out of business, it does not normally repay the bondholders in full. 6. Bondholders usually have no voice in or control over how the corporation is run. 7. Bondholders have a claim against the property and income of a corporation that must be met before the claims of any stockholders, including those holding preferred stock.
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