if a corporation finances with the use of bonds rather than equity a desirable o

Question

if a corporation finances with the use of bonds rather than equity a desirable outcome of selecting this when refinancing May will be A major disadvantage of having a corporation finance its activities by issuing bonds would be if a corporation finances with the use of bonds rather than equity a desirable outcome of selecting this when refinancing May will be A major disadvantage of having a corporation finance its activities by issuing bonds would be if a corporation finances with the use of bonds rather than equity a desirable outcome of selecting this when refinancing May will be A major disadvantage of having a corporation finance its activities by issuing bonds would be

Explanation / Answer

Equity financing is the ownership issuance by a corporation to the general public. By this issue, ownership of the company is distributed among people based on their subscriptions.

Issuing bond is also a type of acquiring finance but through loan. Since this is a loan, it requires a periodical regular interest payment.

Disadvantage: Payment of interest to the bondholder could be a burden of the corporation, since it reduces net income. Such thing is not there for equity financing. Shareholders would get dividend (a share of net income) at the discretion of the management. The amount of such payment doesn’t reduce the net income too.

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