Owning a bond signifies what type of relationship with a company?

The relationship established by owning a bond with a company is classified as a debtor relationship. When an individual or institution purchases a bond, they are essentially lending money to the issuer, which could be a corporation or government. In return for this loan, the issuer commits to pay back the principal amount on a specified maturity date along with periodic interest payments.

This arrangement clearly defines the bondholder as a creditor rather than an owner. Unlike shareholders, who have an equity stake and can influence company decisions through voting rights, bondholders are not entitled to any ownership rights in the company. Their interests are aligned with the repayment of the debt rather than the performance of the company's stock. Thus, the bondholder has a secured claim on the company's assets, which makes the relationship fundamentally one of creditor and debtor. This distinction is crucial in understanding the different types of financial instruments available in the market.