1SOL81 - Valencia Community College Assignment 8.0 Solution...

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Valencia Community College Assignment 8.0 Solution – Battiste 1. Investors and creditors have a few things in common and are different in a couple of ways. First, both investors and creditors provide resources to business entities. Secondly, both use accounting information to evaluate potential risks and returns. Moreover, both expect a positive return in exchange for investments. However, creditors usually receive a fixed return (interest) but investors benefit or suffer depending on how well the business performs. Creditor’s investments are safer and more certain. Creditors get paid back on specific date(s) called maturity date(s). Creditors get paid back first in the event of a business liquidation. Investors have management rights but usually delegate those rights to the Board of Directors and managers. Investors have the right to vote on important matters affecting the corporation, creditors do not have voting rights. Investing in stock is “better” in some situations and investing in debt securities, like bonds, is better in others. In all depends on the risk tolerance level of the investor and the amount of returns the investor is looking for. Stocks can go up 35% or more one year and down 45% the next year. That kind of volatility drives some people nuts. Some people prefer a safe and certain 6% with less risk of lose. So, like I said, it all depends. 2. Fred’s initial investment cost $22.00 per share ($4,400/200). The
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1SOL81 - Valencia Community College Assignment 8.0 Solution...

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