An assessment is a sum levied proportionate to stock held by stockholders, to help out the business when it is not prospering, or when more money is needed to carry it on. It is levied as so many dollars on each share at its par value.
The directors are those shareholders elected by all to manage the affairs of the corporation.
A bond is, in form, a carefully drawn interest-bearing promissory note. Ordinarily, it runs for a period of years with interest often payable semi-annually. It is more formal than the ordinary promissory note. Bonds are usually [877] issued by national, state, county, or local governments, or by corporations, when they wish to raise large sums of money for immediate use.
Difference Between Stocks and Bonds
A bond runs for a specified time. It bears a specified interest, and is an absolute promise to pay the face of it at maturity. It matures at a definite time, and at that time the holder is paid its face value and no more, by the organization that issued it, unless such organization is insolvent, or has repudiated its debts.
Stocks.—A certificate of stock is no promise to pay. It simply shows that the holder owns as much stock in the corporation as is shown by the face of the certificate. It bears no interest and has no date of maturity.
The interest returns of the bondholder are certain and definite. The returns of the stockholder, dividends, are uncertain and depend on the profits of the business.
Consequently, no table can be arranged to show at what rate stocks can be bought to yield a definite return; but with bonds, tables may be made which show at a glance what the return will be from a purchase made at any rate.
Application of Percentage to Stocks
1. To find the value of stocks, when above or below par.