Learning Module for Business Finance Who are the makers of Financial Liabilities and Equity instruments? Do you have any idea? Please write on the box your answers. When companies are in need of funding, they either sell debt securities (or bonds) or issue equity instruments. The proceeds from the sale of the debt securities and issuance of bonds will be used to finance the company's plans. Note: The users of funds are the makers of financial liabilities and equity instruments. Common examples of Debt and Equity Instruments Debt Instruments have fixed returns due to fixed interest rates. Examples of debt instruments are as follows: . Treasury Bonds and Treasury Bills are sued by the Philippine government. These bonds and bills have usually low interest rates and have very low risk of default since the government assures that these will be paid. . Corporate Bonds are issued by publicly listed companies. These bonds usually have higher interest rates than Treasury bonds. However, these bonds are not risk free. If the company which issued the bonds goes bankrupt, the holder of the bonds will no longer receive any return from their investment and even their principal investment can be wiped out. Equity Instruments generally have varied returns based on the performance of the issuing company. Returns from equity instruments come from either dividends or stock price appreciation. The following are types of equity instruments: Preferred Stock has priority over a common stock in terms of claims over the assets of a company. This means that if a company were to be liquidated and its assets have to be distributed, no asset will be distributed to common stockholders 9