Although ordinary shares represents a riskier investment to an individual than do bonds, in the sense of exposing the firm to the risk of bankruptcy, bonds represent a riskier method of financing to a corporation than ordinary shares do.

Question

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Bonds require fixed interest payments, increasing financial risk for a corporation, while ordinary shares do not obligate the firm to pay dividends, thus posing less risk of bankruptcy.

Although Ordinary Shares Represents a Riskier Investment to an Individual