Questions On Possible Investments For Consideration

To: Owner of Henderson and Co. From: Vanda Mallo, Accountant Date: December 10, 2015 Subject: Possible Investments for consideration Dear Owner, As the company accountant, I have compiled the information in this memo to help you choose possible investments for the upcoming calendar year. The material contains details on the several investment choices available to you, along with a comparison between classes of securities. I have also included specifics regarding a few of the classes which I feel will be very helpful as select the most appropriate investments for the company. Within the different investment through ownership, lending and cash equivalents, I have outline below the different types available to Henderson and Co. A Bond†¦show more content†¦While the interest rate is usually lower than corporate bonds, the interest income you may earn on the municipal bonds is typically exempt from federal income taxes and if you live where the bonds are issued, it may also be exempt from state and local income taxes. Whereas a bond offers little investment risk, it also has a small potential return. As a result, the rate of return on bonds is generally lower than other securities. Bonds are safer and more stable than stocks and you will be guaranteed a steady income from bonds, even though as a bondholder you will not be entitled to dividends or voting rights. Stock securities provide relatively high potential returns although they are volatile and fluctuate in value on a daily basis. Stocks are an equity security, therefore you acquire an ownership interest in a company when you buy their offered stock. You are entitled to a portion of company profits and sometimes shareholder voting rights. Although stock prices can fluctuate greatly, have a higher investment risk than most other securities and offer no guarantee that you won t lose money, it usually has the potential for the greatest returns. While Preferred stock normally offers dividends, you will have no voting rights therefore you may consider investing on common stock, as you will have greater potential for higher returns. There are no guaranties with stock and many don t pay profits or dividends. Despite the fact that as a stockholder