Question

The holder of bond is ____ of the company.

• A. secretary
• B. owner
• C. creditor

Hint:

Remember the key distinction: Shareholders are owners (equity), while bondholders and debenture holders are creditors (debt). This fundamental concept is crucial for understanding corporate finance.

Answer 1

The Correct Option is C

Step 1: Understand the relationship between a bondholder and a company. A bond is a debt instrument, which means when an individual or entity purchases a bond from a company, they are essentially lending money to that company. Step 2: Define the terms. An 'owner' of a company holds equity (shares), not debt. A 'secretary' is an officer of the company. A 'creditor' is an entity that has lent money to another entity. Step 3: Conclude the relationship. Since the bondholder has lent money to the company, they are considered a creditor. The company is obligated to pay interest on the bond and repay the principal amount at maturity.