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Stocks vs Bonds
For an ordinary investor, stocks and bonds are both forms of investment as they earn money for him. If we look from the perspective of companies, both stocks and bonds are instruments with which companies acquire funds for their operations. These are issued by companies between common people to raise funds. It is amazing that people do not understand the basic differences between the two instruments as they are concerned more with the return on their money. Both stocks and bonds are floated by companies and are traded in the share market. Interest rates on both stocks and bonds fluctuate and are subject to market forces. Stocks Stocks are a share of the ownership of a company. Initially, they are sold by the original owners of a company to gain additional funds to help the company grow. The owners basically sell control of the company to the stockholders. After the initial sale, the shares can be sold and resold on the stock market. If the company does well, or even if everyone thinks the company is going to do well, the price of the stock goes up. This is how stockholders make a return on their investment. Conversely, if the company does poorly, then the shares decrease in value, and the stockholders lose their investment. Companies are always in need of money and they realize it in many different ways. One of them is through selling stocks. The development works of any company cannot be completed without raising capital by selling stocks. For this purpose, companies target small investors. The place where they are able to get customers for their stocks is stock market. When you purchase stocks, you are actually having ownership in the company. Your fortunes now get linked with the performance of the company and any profit or loss of the company is yours. This implies that there is inherent risk in all stocks though the stocks of some companies are safer than those of others. As you become a stake holder, you get dividends in the ratio of stocks you hold. Stocks have the potential to earn attractive returns if they are of an established company. On the other hand, stocks can also be risky if your selection of company is not prudent and it starts to make a loss as against anticipated profit. Stocks present a very attractive option to an investor in terms of return of investment in the shortest possible time.

Bonds Bonds are another word for loans taken out by large organizations, such as corporations, cities, and the U.S. Government. Since these entities are so large, they need to borrow the money from more than one person or bank. Bonds are instruments used by companies to raise capital for their development. These are for a specified time period and carry interest with them. This is, in other terms, debt that the company secures from common people. Bonds always pay interest to bondholders. Generally, a fixed interest is paid every six months. If you have bonds issued by a company, it doesnt mean you have any ownership in the company. After the expiry of the term, the company pays back the principal amount to the bond holder. Unlike stocks, bond holders do not get any dividends. They do not get high returns when the company makes huge profits. They are entitled to a fixed interest only. All bonds have a maturity date and some bonds have a very long duration of 30 years. Bonds can be bought and sold in the open market like stocks Both bonds and stocks are investment tools for a common investor and he has to decide what he is looking for. A safe and fixed return on his investment, or is he willing to take risk and prepared to float with the fortunes of the company. Stocks carry much higher potential in comparison to bonds but they are risky as well. Bonds give lower returns but they are safer than stocks. In my opinion, if you are investing for a short period, bonds are safer. But if you are a long term investor, you should go for stocks as stocks have traditionally outperformed bonds in the long run. For a complete portfolio, an investor needs to have both bonds and stocks to get a better return on his investment and also to safeguard his interests. Both stocks and bonds are good forms of investments and any investor would do well to keep a healthy mix of the two to keep his investments safe.

2. Franchising vs Licensing
It is really a great feeling to be changing over from an employee to an owner. But if you are starting a small business that is dependent upon selling products of a big company, there are two ways you can do it. Either you get a license to sell the products or services, or you become a franchise of the company. It is really very confusing as the two terms are almost same and you never gave it a thought but now you have to decide between the

two. Franchising and licensing are two concepts of doing business with big companies that evolved during the eighties and have become very popular and almost a norm these days. Franchising A franchise is a right granted to an individual or group to market a company's goods or services within a certain territory or location. Some examples of today's popular franchises are McDonald's, Subway, Domino's Pizza, and the UPS Store. There are many different types of franchises. Many people associate only fast food businesses with franchising. In fact, there are over 120 different types of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises, just to name a few. Franchising is perhaps the most popular model of doing business with large companies these days. Who hasnt heard or visited McDonalds or KFC to have a wonderful meal? But the outlet you went in is not managed by the company itself and is in fact looked after by a franchisee that is carrying out business by getting the authority to use the logo and the company name in lieu for shared profits with the company. In franchising, the very fact that the company name and logo is utilized by the franchisee reflects upon the level of relationship between the company and the franchisee. The company places its faith in the person and he has to maintain the quality and standards of the product. He gets the benefit of the advertisements done by the company. He gets readymade customers because of the goodwill of the company and an already developed market. Licensing Licensing is another popular model of business. Here the relationship between the company and the person are not as tightly knit as they are in franchising. The business owner, in most cases is not allowed to use the logo or the trademark of the company. In many instances, licensee has to work hard to establish his own identity in the market. In licensing, the company does not grant exclusive territorial rights to the licensee and retains the right to grant more licenses in the same geographical area to other persons as well. This becomes a headache for a person as he faces stiff competition from others who are selling the same product. Licensing is beneficial in monetary terms as there are better margins for the licensee. There is not much of a relationship and the licensee just purchases the products and sells them on his own. Difference between Franchising and Licensing

Large companies have both the models to offer to a person who wishes to be liked with them. As a business owner, one has to choose from the two models as to how he wishes to go ahead. If he feels that he can work hard and sell the products of the company in the face of competition from others, he can choose to become a licensee which offers better profit margins for him. But if he is comfortable with the advertising of the company and wishes to have a readymade market, then franchising is a better option for him, though with reduced margins. In franchising, there is a lot of support from the company to the franchisee in terms of advertisement and training whereas there is no such support in the case of licensing In franchising, you have to pay royalty to the company every time you make a profit while in licensing, you keep the profits for yourself. In franchising, the company cannot make another franchisee without prior approval from the franchisee but in licensing the company is free to sell its products through any number of licensees in the same geographical area. Recap: Franchise can use the brand name and logo of the parent company has a readymade and informed customer base proven product or service semi-monopoly in a particular area training and knowledge sharing possible But you have to pay royalty from the profit and will have a greater control by the parent company than in the case of a license. Licence In most cases licensee is not allowed to use the logo, exceptions are there Loosely knit relationship between licenser and licensee Less support in marketing, though brand promotion by parent company will be beneficial company does not grant exclusive territorial rights to the licensee, have to face stiff competition within the territory itself However in case of license monetary benefits are more, as licensee can keep the profit with him and has more freedom of operation.

3. Manager vs Leader
* A Leader is essential; A Manager is necessary It is not that easy to differentiate between a manager and a leader. This is because both the words seem to mean one and the same thing. There can still be a great difference between manager and leader. You would wonder whether managers can be good leaders or leaders can be good managers. A leader is capable of taking the concern or the firm into new levels of growth and development. A good leader is capable of identifying the potential of the people and is an expert in looking at the future. They are good in tapping talents. A manager on the contrary is adept in control, action and analysis. Managers are characterized by the factors such as accuracy, calculation, methodology and statistical approach. Hence it can be said that a manager is qualified by the mind. A leader on the contrary is qualified by the spirit. Leaders have vision and are of spirit. Management is not an art whereas leadership is an art. A leader is certainly a step above a manager. This is because of the fact that a leader is essential whereas a manager is necessary. Leaders are essential in an organization especially when it is growing by leaps and bounds. This is because the organization would start planning into the future and thinking about various methods of growing. This is the time whey it needs the help of a leader. In a way it can be said that concerns or firms that look for rapid results need managers whereas organizations that look for growth and development would look for leaders. In Short: The difference between manager and leader: Leaders have vision and are of spirit, whereas managers are of the mind. Leaders are essential for an organization, whereas managers are necessary for organization. Leaders look for growth and development, whereas managers look for rapid results.

4. Forfeiting vs Factoring
What is the difference between Factoring and Forfaiting and how can it help your import/export business? During difficult financial times many import/export businesses are looking for new ideas to increase their cash crunches. Import/Exporting can have astronomical rewards because you can make a profit by getting the best benefits of two economies, a low cost production economy as well as a high purchasing economy. Much of North America and Western Europe import a large percentage of their goods. There are many opportunities navigating global economies; however almost all of these opportunities require large amounts of short term cash for purchasing, production, and transport. Factoring and Forfaiting are two key strategies to help importers and exporters to get a start in business as well as increase short term and long term cash flow.

Factoring
is when a company trade account receivables that may take 30, 60, 90, or even 120 days for immediate upfront cash to pay for vendors, payroll, supplies, or other expenses. Factoring involves using a third party company who will provide cash upfront for a fee. Usually the third party will hold back a portion of the total invoice as surety i.e. a $100,000 invoice factoring company may give your $60,000 to $80,000. When the accounts receivable is paid the factoring company will return all of the funds to the exporter minus any applicable charges. Factoring companies prefer

Forfaiting
is usually used for medium and long term debt (1-10 years). Similar to factoring the Forfaiting company will take full responsibility for receiving the payments from the purchaser (importer) in exchange for a letter of credit, line of credit, or cash to the seller (exporter). Forfaiting may by used for only one account or several accounts. The key difference between forfaiting and factoring is that Forfating companies keep a portion of the accounts receiveable whereas a factoring company will return the balance minus their fees. Both financial devices require a few key parts. First the person or entity buying the goods or service must be creditworthy and pay their obligations on a timely basis. No one wants to offer factoring or forfaiting for a client that's a dead beat. In factoring a company that pays in 90 days versus 60 days may result in an extremely costly price for the exporter or company seeking the factoring. Remember these are just a new strategy in an arsenal of

an entrepreneur or business buyer. Like all strategies you need to know all the costs involved, calculate your margins, and be prepared the best strategy for your situation. Do you want to learn more about how to buy a business? I have just completed a brand new guide in buying a business "The Corporate Raider's Guide to Creatively Financing Your First Business."

5. Partnership vs Corporation
What is a partnership? A partnership is a business where two or more people own a company, work together and share the profits or losses on an agreed basis (mostly in equal portions). There are no legal requirements to set up a partnership, but you should consider a formal written contract. Business partnerships are very much like long-term relationships, and over the years of working together situations and attitudes can change, and bitter legal fights can ensue if nothing has been put in writing at the start. A partnership can employ other people on a part-time, full-time or freelance basis. However the partnership element is limited to the owners of the business. Creative partnerships are often started as a group of friends or colleagues who regularly work together. Additionally, there are also a lot of husband and wife teams in the creative sector. If you want to stay friends after your business split, it will be incredibly important to have your legal side covered. A good example are fashion designers Domenico Dolce and Stefano Gabbana of Dolce and Gabbana who recently split up romantically after 19 years, but who are continuing the management of their successful company. What is a corporation? Corporation is a legal entity that is created under the laws of a State designed to establish the entity as a separate legal entity having its own privileges and liabilities distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter and many of these chartered companies still exist. Most jurisdictions now allow the creation of a new corporation through registration. Corporations exist strictly as a product of the corporate law.

An important (but not universal) contemporary feature of a corporation is limited liability. If a corporation fails, shareholders normally only stand to lose their investment and employees will lose their jobs, but neither will be further liable for debts that remain owing to the corporation's creditors. Despite not being natural persons, corporations are recognized by the law to have rights and responsibilities like natural persons ("people"). Corporations can exercise human rights against real individuals and the state, and they can themselves be responsible for human rights violations. Corporations are conceptually immortal but they can "die" when they are "dissolved" either by statutory operation, order of court, or voluntary action on the part of shareholders. Insolvency may result in a form of corporate 'death', when creditors force the liquidation and dissolution of the corporation under court order, but it most often results in a restructuring of corporate holdings. Corporations can even be convicted of criminal offenses, such as fraud and manslaughter. Although corporate law varies in different jurisdictions, there are four core characteristics of the business corporation.

6. Bookkeeping vs Accounting
Bookkeeping and accounting are two different departments dealing with the accounts of company. Bookkeeping is the initial stage, in which we keep the record of income and expenditure, whereas in Accounting department accountants analyze the companys financial activity and prepare reports. Both are very important for the proper management and financial success of a business. Bookkeeping In simple words, recording the financial dealings of a company or individual is bookkeeping, like sales, purchase, revenues and expenditures. Traditionally, it is called as bookkeeping since records were kept in books; now there are specific software for this purpose, but the old name is still in use. Usually, bookkeepers are appointed to keep the record in accurate and precise manner. This activity is very important for the financial health of a company, as it informs the management about up to date financial condition of their company. Commonly used books are, daybook, ledger, cashbook and business checkbook, many others are also used, according to the nature of business. A bookkeeper enters a particular financial activity in its respective book and post to the ledger as well. Single entry and double entry are two types of bookkeeping. As the name suggest, in single entry a transaction is either recorded in debit or in credit column of the same

account, but in case of double entry, two entries of each transaction are carried to ledger, one in debit column and other under credit heading. Accounting Accounting deals with organized recording, reporting and analysis of financial activity of a company. Making statements regarding assets and liabilities also come under the jurisdiction of accounting. Accountants are also responsible for making monthly fiscal statements and yearly tax returns. The accounting departments also do preparation of companys budgets and plan loan proposals. Moreover, they analyze the cost of companys products or services. Now a day, Accounting is called language of business, as it provides required information to many people, for instance, Management accounting is the branch, which keep the mangers of the company informed. Financial accounting informs the outsiders, like bank, vendors and stakeholders, about the financial activity of company. The nature of information for the outsiders and insiders is different, that is why big companies need both of these branches. Differences and Similarities Both are different sections of finance department, bookkeeping involves the keeping of systematical record of companys financial activity, where as accounting is the next section, which analyze these records to prepare different reports and proposals. Bookkeeping in the procedure, which helps the management to manage dayto-day financial activity of company, whereas Accounting justifies these financial actions and find their reasons. In large companies, accounting department is also very large to analyze the fiscal activity of business, on the other hand, an individual usually does Bookkeeping or at the most two people are involved in this activity, even in big companies. Conclusion Bookkeeping and Accounting are essential for the successful running of any business. Bookkeeping is important as it is the primary stage of keeping financial records and accounting is the building of analysis based on the brick of bookkeeping.

7. Commercial & Investment banks

Overview

The banking sector is split into two fundamental divisions: investment banking and commercial banking. Institutions that mix the two activities have come under scrutiny lately, accused of being major contributors to the global economic meltdown of 2008. Debate rages as to whether the two distinct banking activities should be carried out under a single roof, or whether they should be forever separate. Knowing the difference between commercial banks and investment banks can shed some light on this issue. Features Commercial banks manage deposit accounts, such as checking and savings accounts, for individuals and businesses. They make loans to the public using the money held on deposit. Investment banks differ strongly; these institutions facilitate the buying and selling of stocks, bonds and other investments, as well as helping companies to go public with initial public offerings (IPO). According to an article in The Enterprise from February 2009, commercial banks are highly regulated by a number of federal authorities, including the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve. Commercial banks are federally insured to protect customers' accounts. Investment banks, on the other hand, are only loosely regulated by the Securities and Exchange Commission (SEC), allowing them much more leeway in their strategic decision-making. Risk Tolerance Investment banks have a higher risk tolerance due to their business model and the relative weakness of government regulation in the industry. Commercial banks are much less tolerant of risk. Panic can ensue if families and businesses lose their checking and savings accounts, so commercial banks have an implied fiduciary duty to act in the best interest of their clients, not to mention the tight strings attached to commercial banks' FDIC insurance. History and the Future According to BU.edu, institutions that mixed commercial and investment banking activities contributed in part to the great depression of the early 20th century. The Glass-Steagall Act, part of the Banking Act of 1933, mandated the complete separation of commercial and investment banking activities, which seemed to yield stable results until its repeal in 1999 by the Gramm-Leach-Bliley Act. Since then, large banks have been free to engage in both types of banking under one roof, which is believed to have been a large contributing factor to the bust of the internet bubble in 2000 and 2001 and the beginning of the global recession in 2008. Whether or not Congress will act to

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separate the two activities, seemingly so volatile when used in tandem, remains to be seen. Benefits of Combination Banks mix commercial and investment activities to realize significant benefits. Acting as an investment bank, an institution can help a company sell an IPO, then use its commercial division to extend a generous line of credit to the new corporation. The generous loan allows the new company to finance rapid growth and boost its stock price. The bank can then reap the benefits of increased trading revenue and snag more commissions from future stock offerings. Considerations The problem with mixing investment and commercial banking is that institutions have historically gone too far to prop up weak and undeserving companies, leading to bubbles and disastrous busts. Mixed-business banks have the ability to create excitement and hype surrounding particular companies while injecting large sums of capital to prop up their stock valuations. Without paying attention to the fundamental strength of sectors and individual companies, however, this behavior is almost guaranteed to end in disaster.

8. Common Stock vs. Preferred Stock

There are two classes of stock that companies offer: common and preferred. These come with different financial terms and offer different rights in relation to the governance of the company. Here are some of the key differences between these two types of stock and the implications for how each type is used. Common_Stock The holders of common stock can reap two main benefits from the issuing company: capital appreciation and dividends. Capital appreciation occurs when a stock's value increases over the amount initially paid for it. The stockholder makes a profit when he or she sells the stock at its current market value after capital appreciation. Dividends, which are taxable payments, are paid to a company's shareholders from its retained or current earnings. Typically, dividends are paid out to stockholders on a quarterly basis. These payments are usually made in the form of cash, but other property

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or stock can also be given as dividends. Payment of dividends, however, hinges on a company's capacity to grow or at least maintain its current or retained earnings. This means that ongoing payment of dividends cannot be guaranteed. Common stock ownership has the additional benefit of enabling its holders to vote on company issues and in the elections of the organization's leadership team. Usually, one share of common stock equates to one vote. Preferred_Stock Preferred stock doesn't offer the same potential for profit as common stock, but it's a more stable investment vehicle because it guarantees a regular dividend that isn't directly tied to the market like the price of common stock. This type of stock guarantees dividends, which common stock does not. The price of preferred stock is tied to interest rate levels, and tends to go down if interest rates go up and to increase if interest rates fall. The other advantage of preferred stock is that preferred stockholders get priority when it comes to the payment of dividends. In the event of a company's liquidation, preferred stockholders get paid before those who own common stock. In addition, if a company goes bankrupt, preferred stockholders enjoy priority distribution of the company's assets, while holders of common stock don't receive corporate assets unless all preferred stockholders have been compensated (bond investors take priority over both common and preferred stockholders). Like common stock, preferred stock represents ownership in a company. However, owners of preferred stock do not get voting rights in the business. The different types of preferred stock include:

Participating preferred stock, which entitles holders to dividend increases if, during a given year, common stock dividends exceed those of preferred stock dividends.

Adjustable-rate preferred stock, which is tied to Treasury bill or other rates. The dividend is augmented based on the shifts in interest rates, determined by an established formula.
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Convertible preferred stock, which has a conversion price named at its issuance so that it can be converted to a company's common stock at the set rate.

Straight or fixed-rate perpetual stocks, which have no maturity date because the dividend rate is set for the life of the issue.

Companies that undergo multiple rounds of financing may issue multiple classes of preferred stock. In these situations, each stock class is granted its own set of rights, per its round of financing (for example, "Group I Preferred," "Group II Preferred," and so on). Typically, preferred stock is favored by private companies, which often want to separate stockholders' economic interest in the company from the actual governance of the business. Another reason that preferred stock is primarily a tool of private companies is that stock exchanges and governing bodies tend to frown upon companies issuing preferred shares that can be publicly traded. Issuing stock to shareholders, even in a very small corporation, is a complicated process. Consult this checklistto ensure that you don't miss any critical steps.

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