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Accounting Case

Essay by   •  June 5, 2012  •  Essay  •  266 Words (2 Pages)  •  1,400 Views

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1. Compare and contrast investments in corporate bonds with investments in common stock.

I will explain investments in corporate bonds and investments in common stock first, and then do some compare and contrast.

Common Stock

The definition of common stock in the book is that a share of ownership in a corporation. Each share represents one vote in the election of the board of direvstors and other pertinent corporate matters. Common stock represents ownership in a company and a portion of dividends. Investors also have voting rights (one vote per share) to elect the board members who oversee the major decisions made by management. Over the long term, no investment provides better returns at a reasonable risk than common stock.

Bond

The definition of bond is that an interest-bearing debt instrument that allows corporations to borrow large amounts of funds for long periods of time and creates a liability for the borrowes. It is similar to a mortgage with a bank, bonds are an issue by a borrower to a lender. When I buy a corporate bond, I was loaning my money to a corporation for a predetermined period of time (known as the maturity). In most cases, the bond's par value is $1,000. This is the face value of the bond and the amount the lender will be repaid once the bond matures. There are three important factors need to consider before buying a bond. The first is the person issuing the bond. The second is the interest will receive. The third is the maturity date, the day when the borrower must pay back the principal to the lender.

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