alleryStart learning →What do securities represent to the person holding them?
AEither ownership in the issuer or a loan to it
BOnly a loan made to the issuing organization
COnly an ownership stake in the issuing body
DEither a tax credit or a government subsidy
Answer & Solution
Correct answer: A. Either ownership in the issuer or a loan to it
1. Securities are investment certificates that represent either equity, meaning ownership in the issuing organization, or debt, meaning a loan to the issuer.
2. Corporations and governments raise capital to finance operations and expansion by selling them to investors.
3. Investors take on a certain amount of risk in the hope of a profit from the investment.
4. Confining securities to one of the two categories would exclude either every share or every bond.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 16 "Understanding Financial Management and Securities Markets", section 16.6 Securities Markets_
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