Chapter 6, Problem 13AA

To determine

To analyze: The main differences between a bond and a stock.

Explanation of Solution

In order to fund or extend its activities, stocks and bonds represent two separate ways for an organisation to raise capital.

A bond is a fixed income asset representing a loan made to a borrower by a lender. Bonds are units of debt issued and securitized as tradable assets by businesses. Bonds reflect debts. When a company or business issues a bond, it issues debt with the conformity of paying the interest for using the money.

Whereas, a stock is a general word used to describe a company's ownership certificate. Stocks are literally individual company shares. When a business issues stocks, it sells a piece of itself in return for cash.