Bond versus Equities Market The bond and equity markets are best differentiated by unique characteristics which are summarized below: Equities Market
Equity buyers are shareholders in the underlying company issuing the equity security
Shareholders are part owners of the underlying business in proportion to the investment made
Shareholders are paid last upon liquidation of the underlying business
Returns to shareholders are called dividends
Dividends are not guaranteed but are at the discretion of the Board of directors
Shares have no maturity date
Shares have higher risk and return on investment than bonds
Market price of a share is determined by the expected value on current and future earnings
Shareholders have the RIGHT to attend and vote at general meetings
Primary source of long term equity capital
Debt Market
Buyers of bonds are known as bondholders
Bondholders are creditors or lenders to the underlying business issuing the bond in proportion to the amount of money lent.
Bondholders have priority on repayment upon liquidation of the underlying business
Guaranteed interest income
Bonds have a defined outstanding lifespan to maturity after which they are redeemed
Bonds have lower risk and return on investment than equities
Market price of a bond is based on credit rating, term to maturity, interest rate and yield
Bondholders have no RIGHT to attend and vote at general meetings
Primary source of long term borrowed capital
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