financial accounting 142

Respond in 200 words:

Common stock is a unit of ownership in a company. A bond is borrowed and holders of bonds are not owners of the company, they are lenders. Stocks are traditionally more difficult to value than a bond “due to the different rights and entitlements of bondholders and stockholders” (Ozyasar, 2017). When it comes to stocks, there is no limit to how high a dividend payment can reach. On the other hand, a bondholder can only receive whatever the full coupon payment is. Another factor is the intangible value of voting rights. Being a stockholder, you have a right to vote in critical decisions like deciding who stays and goes on a board of directors or help determine the future of the company. “It is possible to sell the voting rights associated with your shares without giving up the shares themselves” (Ozyasar, 2017). This is not something that cannot be predicted and is not a matter that can always be accounted for happening during ownership. A bondholder does not have the type of power or control a stockholder does. (michelle)

Respond in 200 words:

Intrinsic value measures the worth of an asset. Market value represents the current value of a company as it is reflected by their stock price. Stocks are more difficult to value than a bond because there are more qualitative factors that make up the evaluation of the stock. Additionally, stocks are harder to value due to the future cash income being difficult to predict and that they do not have a maturity value. With bonds, you can make a multitude of inferences about its pricing, whether it will be paid, or whether a bond has a worse or better chance of being paid off than it was when it was issued. Bonds are easier to value because you just need to know if the company has enough cash to make the bond payments. (victoria)

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