Bonds and stocks are two popular ways of fundraising at a corporate level. While the two terms are sometimes used interchangeably, they represent sufficiently different phenomena. The following paper contains a response to a discussion post regarding the differences between stocks and bonds.
The discussion provides a concise definition of both terms and outlines in broad strokes the principles behind each of the processes. In my opinion, the provided descriptions are not representative. For instance, buying stocks is defined as “the purchase of a stock company,” which is not an accurate description. It would be more appropriate to describe it as purchasing a share of a company (Kenny, 2017). Bonds, on the other hand, are described fairly accurately as “debt certificates.” It is also worth noting that the post appropriately refers to the level of control implied by both bonds and stocks. However, it would be reasonable to include the justification for each action. While the stability and profitability of the company’s operations are referred to in the description, the initial public offering procedure and requirements are omitted from the discussion entirely. I argue that this is an important detail as it highlights the rationale behind the selection of fundraising approach.
The author also correctly identifies the risks pertinent to each practice and points to the profitability of the company as a chief determinant of success (Harms, n.d.). However, the example of the possible annual interest rate of bonds (the 10.8%) is neither justified nor clearly attributed to their quantitative nature, which may be confusing when taken out of context. Finally, the list of advantages and disadvantages covers all important points.
On the whole, the discussion provides a decent overview of stocks and bonds. Nevertheless, some of the claims would benefit from additional details. Finally, some points are confusing when taken out of the context.
References
Harms, L. (n.d.).The risks of bonds vs. stocks. Web.
Kenny, T. (2017). Differences between stocks and bonds. Web.