Question

For a corporation, a bond is a­­­ ­­­________ obligation, but management of a corporation has a...

  1. For a corporation, a bond is a­­­ ­­­________ obligation, but management of a corporation has a ________ duty to its common shareholders.
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Answer #1

First Blank - Debt

Second blank - Fiduciary

Explanation : a bond is a debt obligation to the company as it borrowd money from the public and in return the corporation has to pay interest to them at a regular interval of time and at the end of maturity. The comoany has to return the principal amount to the investor. The bondholder doesn't have any right in the management of the company like common shareholders and they are not involved in making key decision.

While for common shareholder the management has fiduciary relationship which means acting in good faith for each other, the shareholders are the owner of the company who owns some percentage of stake in the company. The management try to involve in best practice so that return to them gets maximised.

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