Bonds vs stocks: debt and equity explained

Video explainer · Stocks · Summary written by UXS November 10, 2026

Video by Khan Academy on YouTube (9:21, uploaded February 2, 2009). Embedded with the official YouTube player; UXS did not make this video. Watch on YouTube

Our summary

Khan Academy uses a simple company balance sheet to separate the two main ways a company raises money.

  • Debt: the company borrows. As a security, that is a bond: the holder is a lender with a claim to be repaid with interest.
  • Equity: the company sells part-ownership. As a security, that is a stock: the holder owns a share of what is left after debts are paid.
  • Securities: the video defines a security as something that can be bought and sold and represents a claim with economic value.
  • Different risks: lenders are paid before owners, so bonds usually have more predictable payments, while stockholders take more risk in exchange for a share of growth.

Our take: this is the foundation for understanding why stock prices react to earnings (see what is a good P/E ratio) and why bond yields matter to stock investors.