Question

To raise capital, what are the pros and cons of selling bonds compared to issuing stock...

To raise capital, what are the pros and cons of selling bonds compared to issuing stock or borrowing money from a bank?

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Answer #1

Answer:-

Selling bonds is one of the approaches to raise capital for an organization similarly as giving stocks or borrowing cash from the bank.

Be that as it may, selling bonds has a lot of advantages and disadvantages when seen from the point of view of the organization.

Pros of selling bonds:

  • Giving bonds is an increasingly alluring suggestion as opposed to borrowing cash from banks.
  • The financing costs they pay to their speculators is less contrasted with the advance premium they would require to pay to the banks
  • Giving bonds encourages the organization to acquire a lot of cash with incredibly low premium
  • With colossal cash, the organization can put resources into development, framework and different tasks.
  • Enormous and progressively productive loan specialists can be pulled in.
  • The issuance of bonds have no possession appended to the organization though issuance of stocks have proprietorship connected to the organization.

Cons of selling bonds:

  • Contingent upon the financing cost, the organization may have or confront challenges in paying continuous intrigue.
  • With extra benefits, the organization needs to figure out how to develop its business and activities.
  • Some of the time borrowing a lot of cash may wind up or leave individual resources in danger for independent companies.

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