3/22 Bonds and Stocks
- Bonds - loans/ IOUs that represent debt that the gov't or corp must repay to an investor, bond holder has no ownership in company
- Stocks - owned
- If a corporation issues then sells a bond, is it a liability to the corp., since it is owed and not owned by the corp.
- The buyer who bought the bond now has it as an asset as the buyer owns it
Stockowner earns profit 2 ways
- Dividends - portions of a corp. profits, are paid out to stockholders. Higher the corp profits, higher the dividends
- Capital Gains - when stockholder sells stock for more he/she paid for it
- Capital Loss - if bought high, and sold low, loss of profit
Central Bank or the FED - stabilizes the economy, maximizes employment
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