Final answer:
The correct statement regarding financial markets is that a bond is a form of loan while stocks represent ownership in a company. Bondholders are prioritized over stock owners during bankruptcy proceedings. Selling shares is a form of equity financing, contrasting with issuing bonds which is a form of debt financing.
Step-by-step explanation:
The true statement about financial markets is: b. A bond represents a loan, whereas a share of stock gives the buyer an ownership stake. When an investor buys a bond, they are effectively lending money to the issuer, which could be a corporation or a government entity. The bond details include the loan amount, the interest rate, and the time until repayment. In contrast, purchasing a share of stock makes the buyer a part-owner of the corporation. Equity financing like issuing stock provides capital to the firm, but also transfers ownership rights to the shareholders. This has implications for control of the company and dividend payments.
Stock owners and bondholders have different claims on a company's assets if it goes bankrupt. Stock owners are residual claimants; they are paid after all debts have been settled, which means bondholders are repaid first.
Issuing bonds is a form of debt financing, not equity financing. Hence, selling shares to raise funds represents equity financing rather than debt financing, and it entails selling a part of the company ownership to the investors.