debt vs equity securities 1

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There are many differences between both debt and equity securities though there are some similarities. Please distinguish between both debt and equity securities and provide examples of each type of investment.

Just do response each posted # 1 to 3 down below only.

Posted 1

Companies invest in both debt and equity securities for different reasons. One reason is to receive money from the investment to increase their income, another is to solidify their relationship with other companies that have a large part to do with the manufacturing of their own product(s). Examples of a debt security include U.S. Government and municipal securities and corporate bonds. Examples of equity securities include ownership interests like capital stock. The differences between debt and equity securities have to do with what management intends to do with them once they have them such as sell, hang on to or use to direct the actions of the company the securities were purchased from. The course of action planned on being taken also determines how the securities are valued. One thing both types have in common is that if there is a plan to sell, both should be valued using the fair value approach. If the purchaser plans to sell a debt security, however, it should be valued using the amortization approach. And if a purchaser plans to use the purchase of an equity security to control the actions of the company it was purchased from, it would be valued using the equity method. (Kieso, Waygandt, & Warfield, 2016)

References

Kieso, D. E., Waygandt, J. J., & Warfield, T. D. (2016). Intermediate Accounting; 16th Edition.Various: John Wiley & Sons, Inc.

Posted 2

Hello Professor and class ,

Equity securities are a claim on the earnings and assets of a company but debt security is more of an investment into debt instruments. most debt securities are traded over the counter. a purchase of stock is an equity security this is because when you purchase stock you have an ownership in the company. A purchase of corporate Bonds is a debt security this is considered a loan to the company and can earn principle and interest on the bond. (Chen, 2018 , p 3)

References :

https://www.investopedia.com/terms/d/debtsecurity.asp

Posted 3

Hello all,

Debt securities tend to have less risk involved than equity investments, but with that the investor is looking at having less return on the investment. This would make sense less risk, less return. They are traded over the counter. Some examples of these investments can be bonds and mortgages, fixed payments such as interest. Equity investments are buying and selling stock (trading like the New York Stock Exchange). The investor is taking on more risk when they are involved with this investment, but also have the potential to get a much high return when selling.

Yana

Kieso, D. E., Weygandt, J. J., & Warfield, D. T. (2016).Intermediate Accounting; 16th Edition. Various: John Wiley & Sons, Inc.

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