DEBT VERSUS EQUITY CLAIM

DEBT:The claim that the hoder of a financial asset has may be either a fixed dollar amount or a varying or residual amount, the financial assets is referred to as a debt instrument.

Example:The car loan , the U.S Treasury bond , the General Motors corporation bond, the Japanese government bond, City of New York bond are the example of debt instrument.

EQUITY CLAIMS: An equity claim which is also called residual claim obligates the issuer of the financial asset to pay the holder an amount based on earnings.

Example:Common stock ,preferred sotck is an example of equity claim.