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In a nutshell, both debt and equity securities are financial instruments that assist companies to finance their operations.
Debt securities are legal obligations to repay borrowed funds at a specified maturity date and provide interim interest payments as specified in the agreements. The examples include commercial papers, bonds, loans, debentures, and T-bills among others. The benefits of issuing debt securities of companies are that the interests paid are tax-deductible: i.e., they are expensed so that companies pay less tax; they protect companies from losing control over operations; and also help discipline management.
On the other hand, debt securities increase the probability of bankruptcy and expected bankruptcy costs; reduce financial flexibilities due to negative covenants among others.
Equity securities represent an ownership stake in a company, such as common and preferred shares. Shareholders are entitled to dividends from post-tax earnings which are taxed at a lower rate than interest payments received for bonds. However they receive dividends only after all creditors have been paid.
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Difference between retrun on equity and return on capital employed?
return on capital employed (ROCE) is net income/(debt&equity) whereas return on equity is income/equity (without debt).
Compare and contrast debt finance and equity finance?
similarities between equity n debt finance
What is the difference between a bondholder and a stockholder?
Bondholders own a share of the debt of a company. Stockholders own a share of the equity of a company.
What is the difference between stock share and security?
Security is a broader term which includes shares as well. There are two types of securities, Equity security and Debt Security. Equity security comprises Share, Common Stock, Options etc. while Debt security comprised of Bonds, Debentures, Bank Notes, Coupons etc. The dictionary meaning of security is something which is secured. But equity shares are not secured i.e., equity shareholders are repaid their money only after the Company repays the pref shareholders and other pref creditors and only if the company has enough money to repay it.
What is the difference between stock market and bond market?
Equity is bought and sold in the stock marketwhile debt is bought and sold in the bond market.
Difference between retrun on equity and return on capital employed?
return on capital employed (ROCE) is net income/(debt&equity) whereas return on equity is income/equity (without debt).
What are Global equity and bond funds?
Global equity and bond funds maintain a portfolio of securities and debt instruments traded worldwide
What is the difference between shares and securities?
Security is a broader term which includes shares as well. There are two types of securities, Equity security and Debt Security. Equity security comprises Share, Common Stock, Options etc. while Debt security comprised of Bonds, Debentures, Bank Notes, Coupons etc. The dictionary meaning of security is something which is secured. But equity shares are not secured i.e., equity shareholders are repaid their money only after the Company repays the pref shareholders and other pref creditors and only if the company has enough money to repay it.
Compare and contrast debt finance and equity finance?
similarities between equity n debt finance
What is the difference between a bondholder and a stockholder?
Bondholders own a share of the debt of a company. Stockholders own a share of the equity of a company.
Why is accounting differenciating between assets and equity?
Equity is the proportion of those assets you own, compared to the debt on those assets. An example would be a house. A house is an asset. The equity is the amount of the mortgage that is paid off plus any appreciation the value of the house. Same with a company. Its the difference between what you own and the debt or liabilities. Assets minus liabilities equals equity. You have equity in assets.
What are trading securities?
"Trading securities are debt and equity securities that the company intends to actively manange and trade for profit." (Chiappetta, Larson, Wild, Fundamental Accounting Principles, 18th Ed., McGraw-Hill 2007, page 589)
What are the two types of financial assets created in the process of direct financing?
Types of Financial Assets:The financial assets fall broadly into three categories.Primary/ direct SecuritiesIndirect SecuritiesDerivative Securities
What is the difference between stock share and security?
Security is a broader term which includes shares as well. There are two types of securities, Equity security and Debt Security. Equity security comprises Share, Common Stock, Options etc. while Debt security comprised of Bonds, Debentures, Bank Notes, Coupons etc. The dictionary meaning of security is something which is secured. But equity shares are not secured i.e., equity shareholders are repaid their money only after the Company repays the pref shareholders and other pref creditors and only if the company has enough money to repay it.
what is the difference between stock and security?
Security is a broader term which includes shares as well. There are two types of securities, Equity security and Debt Security. Equity security comprises Share, Common Stock, Options etc. while Debt security comprised of Bonds, Debentures, Bank Notes, Coupons etc. The dictionary meaning of security is something which is secured. But equity shares are not secured i.e., equity shareholders are repaid their money only after the Company repays the pref shareholders and other pref creditors and only if the company has enough money to repay it.
What is the difference between stock market and bond market?
Equity is bought and sold in the stock marketwhile debt is bought and sold in the bond market.
What happens to your equity in a foreclosure situation?
In a foreclosure situation, your equity is the difference between the value of your property and the amount you owe on your mortgage. If your property is foreclosed upon, you may lose your equity as the lender sells the property to recover the outstanding debt.
