Securities are ________ for the person who buys them, but are ________ for the individual or firm that issues them
assets; liabilities
Securities are assets for the person who buys them, but are liabilities for the individual or firm that issues them.
When a person purchases a security, they own a financial asset that can generate income or appreciate in value. The security represents an investment that the buyer hopes will provide returns and help to grow their wealth. For example, if you buy a stock, you own a share of ownership in the company that issued that stock. If the value of the company increases, your share value will also increase, so you can sell it for a profit.
However, from the perspective of the issuer, issuing securities involves creating a legal obligation to pay returns or interest to the holders of those securities. This obligation creates a liability for the issuer, as they must pay out returns on the securities until they reach maturity or are redeemed. For instance, when a company issues bonds, they are promising to pay the bondholders interest payments until the bonds are paid off or expire. If the company defaults on those payments, they risk damaging their reputation and potentially facing legal consequences.
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