Difference Between Equity Shares & Debt -
What is the Basic difference between Equity & Debt? This is the question of basics of Financial Literacy. Many people invest (I am sorry, In reality they are Speculate) in the stock market and buy the shares but they don’t know that, What is Equity and What is Debt?
This article will teach you in Layman’s language that, what it means by equity and debt and what is the difference between them?
Well, Equity means Shares or the piece of the ownership of a Company. Say for Example, for a while imagine that, you own a business. Now you divide this business into several pieces of equal size and retain 51% pieces (Shares) with you and sell rest of the pieces to the others. These pieces are known as Equity or Shares or Common Stocks. They represent the ownership interest in the company.
Suppose if you own 100 Shares of Google than it means that, you are the owner of that much part of the Business. This is Equity. It is the ownership of the underlying Business/Company.
Now, Debt means when a Company/Business borrows money from the Bank, Financial Institutes or public, it issues a certificate to the lender (Bank, Public or Financial Institution). This certificate is a Debt Paper. And Investors invest in Debt Papers. Sometimes Investors invest in company (By Buying stocks of the Company) while sometimes investors lend money to the Company (By buying its Debt Paper).
So whenever you buy Equity of some Business, it means that you invest your money in that Business and whenever you buy a Debt Paper of any Business it means that you are lending your money to that Business. In other words, that Business is borrowing money from you to expand and will pay you interest on your money.
Now, Whenever government goes into Debt and borrow money from the Investors and people, this Debt Paper is known as Bond. Say for Example, US Treasury Bonds, GOI (Government of India) Bonds…etc…
What is the Basic difference between Equity & Debt? This is the question of basics of Financial Literacy. Many people invest (I am sorry, In reality they are Speculate) in the stock market and buy the shares but they don’t know that, What is Equity and What is Debt?
This article will teach you in Layman’s language that, what it means by equity and debt and what is the difference between them?
Well, Equity means Shares or the piece of the ownership of a Company. Say for Example, for a while imagine that, you own a business. Now you divide this business into several pieces of equal size and retain 51% pieces (Shares) with you and sell rest of the pieces to the others. These pieces are known as Equity or Shares or Common Stocks. They represent the ownership interest in the company.
Suppose if you own 100 Shares of Google than it means that, you are the owner of that much part of the Business. This is Equity. It is the ownership of the underlying Business/Company.
Now, Debt means when a Company/Business borrows money from the Bank, Financial Institutes or public, it issues a certificate to the lender (Bank, Public or Financial Institution). This certificate is a Debt Paper. And Investors invest in Debt Papers. Sometimes Investors invest in company (By Buying stocks of the Company) while sometimes investors lend money to the Company (By buying its Debt Paper).
So whenever you buy Equity of some Business, it means that you invest your money in that Business and whenever you buy a Debt Paper of any Business it means that you are lending your money to that Business. In other words, that Business is borrowing money from you to expand and will pay you interest on your money.
Now, Whenever government goes into Debt and borrow money from the Investors and people, this Debt Paper is known as Bond. Say for Example, US Treasury Bonds, GOI (Government of India) Bonds…etc…
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