FN341A Ch1

Types of Investment in a Business
- Equity Investment
1. Someone takes an equity stake in a business if they become part owner of a business.
2. To take an equity stake in a business, an investor exchanges $ for a stock certificate – a legal financial claim that identifies the holder as a partial owner.
3. These equity holders are also called ‘stockholders’ because they own stock certificates or ‘shareholders’ because they own a part/share of the business.

- Debt Investment
1. Someone who lends money to a business is making a debt investment.
2. To make a debt investment in a business, an investor exchanges $ for a loan contract or bond – a legal financial claim that identified the holder as a lender.
3. These debt investors are know as ‘creditors’ of a business.