- Common
Share
- The common share is a type of
financial instrument issued by a public company that aims to
raise funds from the public for utilizing in their business
operations and expansion. Common shareholders are the owners of
the companies by their holding proportion to their holdings and
have the right to vote at each agenda during the shareholders'
meeting and also be able to share idea on the business
operation of the company. Common shareholders will receive a
return as dividends which derived from net profit of company.
- Benefits of investment in common share
- Dividend
- Investors will
receive returns from investing in common shares in the form
of dividends which depending on the Company's performance
over the period (profit of the Company). In generally, the
dividend policy is to pay not than 50% of annual net profit
after all relate legal reserves are met. And income tax is
not charged to the shareholders for the dividend received
- Capital Gain
- Common share prices
will fluctuate over time which depending on the market
mechanism or demand and supply of the share. Therefore,
with the market condition analyzing, investors will be able
to get capital gain from trading as well as selling at a
higher price than buying.
- Participate as business owner
- Shareholders will
be involved in managing the company in shareholding
proportion by attending shareholders' meetings in order to
vote and making decision on each issues of the company,
holding 1 share has voting right 1 vote.
- Purchase additional share
- A shareholder of a
company may be entitled for subscripting the new issued
shares of the company before public and possibly purchase
the additional at the discount price.
- Bond
- A Bond is as a debt instrument that
aims to mobilize the fund by loaning. In general, the
bondholders are creditors who have been guaranteed to receive
the principal and interest in the specific date (Maturity
date). But the bondholders will not be entitled to make any
decisions on the company's issue as holding common
shareholders. The bond is issued by government called
Government Bond and issued by company called Corporate Bond.
- Benefits of investment in bond
- Fixed income (Fixed interest
rate)
- The bondholders
will receive a return on the form of interest at the fixed
rate, which investors are able to estimate the revenues and
plan the financial status due to the income is guaranteed
in terms of the payment amount and duration.
- Principal
- Investing in bond
is same as saving money for the future (savings) due to the
low-risk financial instrument. More, each bond has its
maturity date and bondholders are in the status of
creditors of the issuers. Therefore, when reaching the
maturity date, the bondholder shall receive a principal.
- Right to claim
- As bondholders are
creditors, the shareholders are the owners. As a result,
creditors will be entitled to a claim against a securities
issuer before the owner. An issuer must pay interest to a
bondholder before paying dividends to common shareholders.
And, in the case of bankruptcy, the company must sale the
company’s property and pay to its bondholder; then, the
remaining amount will be paid to the common shareholders.
- Major
differences between Common Stock and Bond
| Basis for comparison |
Common Stock |
Bond |
| Instrument type |
Equity |
Debt |
| Owners |
Shareholders |
Bondholders |
| Issue by |
Companies |
Government and Companies |
| Return |
dividend |
Interest |
| Claiming priority |
Low |
High |
| Voting right |
Yes |
No |
| Risk |
High |
Low |
| Returned guarantee |
No |
Yes |
