Question

difference between equity vs debt and and explain how the bonds market operates.

Answer 1

Difference between equity and debt are as follows-

A.equity will help in getting ownership of the company whereas devt will be representing as a creditor for the company

B.dividend payment on equity are not tax deductible whereas interest payment on debt are tax deductible in nature

C. Debt will always have a fixed rate of return in form of interest payments where as dividend payments to equity are not mandatory in nature

D. Equity will be having a voting rights where debt will not be having any voting rights.

E.debt will always be having a cost of financial distress where is equity will not have any cost of Financial express.

D. Date can not lead to dissolution of the equity capital and control, whereas issuance of equity will lead to dissolution of the control of the company.

Bond market is operating through continuous trading and it is reflected through Bond yields and it is representing the overall rate of return the investor is expecting out of those bonds, and Bond markets will always have a fixed return in form of interest and their principal payments are also deemed to be secured.