What is the difference between debt instruments and equity - ProProfs Discuss
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What is the difference between debt instruments and equity instruments?



Asked by Puja das, Last updated: Nov 27, 2021

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L. Hawkes

L. Hawkes

L. Hawkes
L. Hawkes, Teacher, Memphis

Answered Jul 19, 2018

Debt instruments are assets that require a fixed payment to the holder. Two examples of debt instruments are mortgages and government bonds.

Equity instruments allow a company to raise money without incurring debt. This can include selling stock. When equity instruments are used, the holders give money in exchange for a portion of the company.

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

A debt instrument is an agreement whereby the issuer promises to repay a loan on a specified date (also referred to as the maturity date). in the interim, the issuer makes fixed interest payments to the investor.an equity instrument (a stock or share) allows the investor to buy an ownership stake in the company. there are two main types of stock: common shares and preferred shares. investors with common shares participate in a proportional claim to profits, losses and any declared dividends. these investors also have voting rights at the companys annual meeting. in contrast, owners of preferred shares are entitled to a fixed dividend and have a prior claim on the companys assets, but do not participate in the companys growth and are not allowed to vote.
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