Economics @ ITT

The Difference Between Stocks and Bonds

Stocks Bonds
Stocks represent ownership. Bonds represent debt.
Common stocks do not have a fixed dividend rate. Interest on bonds must always be paid, whether or not any profit is earned.
Stockholders can elect a board of directors, which controls the corporation. Bondholders usually have no voice in or over management of the corporation.
Stocks do not have a maturity date; the corporation does not usually repay the stockholder. Bonds have a maturity date on which the bondholder is to be repaid the face value of the bond.
All corporations issue or offer to sell stocks. This is the usual definition of a corporation. Corporations need not issue bonds.
Stockholders have a claim against the property and income of a corporation after all creditors’ claims have been met. Bondholders have a claim against the property and income of a corporation that must be met before the claims of stockholders.

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