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Advantages and Disadvantages of Bond Financing

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Discussion: What are the advantages and disadvantages of bond financing?

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Solution Summary

In this solution, a brief overview of bond financing is given. This is then following by information as it relates to the difference between equity and bond financing (link is given). Finally, four advantages of bond financing and two disadvantages of bond financing is given. This solution is 660 words.

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Hello Student,

Before you approach this question, the first thing you would want to do is obtain an understanding of what is bond financing; then after which you can begin to list the advantages and disadvantages of bond financing. Bond financing cannot be discussed however without making mention of equity financing, since the disadvantages of equity financing are what may cause companies to use bond financing and vice versa.

So, What is bond financing?

Over the world, most organizations are forced at times to raise capital either to acquire assets or to do expansion of their business. Whatever the reason is for raising this capital, they may be able to do so by either issuing shares (equity financing) or by issuing bonds (bond financing). Equity financing is a method of financing in which a company issues shares of its stock to investors and receives money in return. Investors benefit from this issue whenever dividends are paid to them. Bond financing, on the other hand, is a type of ...

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