Question

Since bonds are considered a debt that must be payed before any remaining money is distributed...

Since bonds are considered a debt that must be payed before any remaining money is distributed among owners, do you consider this to be a disadvantage to owners?

Homework Answers

Answer #1

In order of payments, bonds have priority over shares. Bonds payments are made before any money is distributed among owners.

Different stakeholders have different types of risk and return. Since risk and return of bonds' holders are compartively less as compared to owners who are facing high risk and having chances of higher returns. So, it's all about risk taken by stakeholders and accordingly their preference in order of payments.

So, owners are paid later than bonds' holders because they have taken higher risk, so it's about risk you have opted for rather than any advantage or disadvantage.

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