Stocks and Bonds

Although stocks and bonds may both be viewed as investment opportunities, there are major differences between these two. Stock represents capital, the financial investment or equity, in a corporation. In a publicly traded corporation, individuals and groups buy and own shares of stock in the company. Shares of stock are traded (bought and sold) on one of the stock exchanges. For example, you might buy shares of stock in Coca-Cola, a publicly traded company. Publicly traded companies are very different from privately owned companies. Private corporations do not sell stock on a public exchange. For example, ECPI is a privately owned company. Its stock is not available to outside investors, nor is it traded on an exchange.

Bonds are debt issued by a government or corporation. Individuals and groups buy and hold these bonds as an investment. The government or corporation that issues these bonds guarantees payment of the original investment plus interest earned at a specific future date. For example, perhaps New York City wants to build a new tunnel and bridge. The city might issue a bond to finance this project.

Both stocks and bonds are used to raise money. Issuing bonds allows the corporation to maintain control since ownership is not changed. Issuing stock gives up control to the stockholders (Wild, Shaw, & Chiappetta, 2014).

Discussion Questions

Image you own or work for a business that is a publicly owned corporation, and discuss the following information in your initial post:

Plans have been designed for a major business expansion that would take place over the next several years. You know you need to raise money to finance this project.

• Identify your (fictitious) company and the project you have planned.
• Are there any advantages to issuing bonds over stocks? Identify one advantage.
• Are there any advantages to selling stocks instead of issuing bonds? Identify one advantage.
• Would you sell stock in your company or would you issue a bond? Explain your decision.
• Now, imagine you sell the stock. Would you issue common stock or preferred stock? Why?

Please provide an appropriate subject bar that captures our interest and gives us an idea as to what your post is about.

Be sure to cite any sources that you use with APA. Wikipedia is not an acceptable source.