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"Education is the most powerful weapon which you can use to change the world”
– Nelson Mandela

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Ch 39 Corporate Financing 2 Assignment

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Q It is said that the two best ways to finance corporate activity is by issuing stocks or bonds. 1) Distinguish between a stock and a bond 2) Distinguish between a mortgage bond and a debenture 3) Distinguish betwen preferred stock and common stock 4) Explain the features of convertible preferred stock and cumulative preferred stock 5) What does it mean if a bond is callable?

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When it comes to considering the capital of a company, a stock becomes an important component of that capital. A stock is the representation of the way in which there is the holding of ownership in a company (Clarkson, Miller & Cross, 2016). In contrast, when a bond is considered, it is a form of loan instrument (Clarkson, Miller & Cross, 2016). There will always be money borrowed against a loan instrument like a bond but never against a stock. There might not be returning of a stock by a stockholder till a company keeps running. However, there is a fixed period of maturity for a bond. There is dividend which is carried by every stock. There is no fixed rate/amount of dividend for every stock.