Debt Securities vs. Equity Securities

Equity securities represent a claim on a corporation 's profits and assets, while debt securities represent shares in debt instruments. A stock, for instance, is an equity security, while a bond is a debt security.

They simply loan the company money as a creditor sells a corporate bond, and they reserve the right to return the principal and interest on the bond.

On the other hand, when someone buys stock from a company, they basically buy a piece of the business. If the business gains, the seller also gains, but the stock also loses value if the business loses revenue.

e.g: Emma recently purchased a home using a mortgage from her bank. From Emma’s perspective, the mortgage represents a liability that she must service by making regular interest and principal payments.

From the perspective of her bank, however, Emma’s mortgage loan is an asset, a debt security that entitles them to a stream of interest and principal payments. Visit Now Debt Collection agency London to learn more about it.