Question

1. Under what conditions should a company issue stock, and what conditions should they issue bonds? And why should they offer either under these conditions?

1. What are the advantages, and disadvantages, to a company when issuing stock and/or bonds?

Answer 1

Conditions when a company should issue stock,or issue bonds.

Stock means share in the capital of a company, If management of a company wants to acquire funds without paying any fixed interest or dividend then they should issue stock.

Bonds are issued when company doesn't want to dilute ownership stake and want to pay only certain fixed amount of interest Only.

What should they offer either under these conditions?

Answer:- If Stock is issued then dividend should be offered and bond is issued then interest is offered.

Advantages, and disadvantages, to a company when issuing stock and/or bonds

Answer:- Advantage -- Interest paid on bond is a tax deductible expense and lowers tax liability of the company whereas Dividend paid is not a expense it is just a allocation of Profits