Fundamentals of Equities

To raise funds for operating a business, a corporation issues various financial instruments. They can be either an equity security or a debt instrument. An equity security represents an ownership interest in a corporation. In contrast to an equity security, a debt instrument is a debt obligation of the issuing corporation and is the subject of the next chapter. Equity securities entitle the holder of the security to the earnings of the corporation when those earnings are distributed in the form of dividends. Should a corporation be liquidated, an investor is entitled to a pro rata share of the corporation’s remaining equity…