Please help answer the following question.
What are the problems caused by issuing 20-year bonds and using the proceeds to pay employees' salaries? Discuss the reason why long-term proceeds to pay employees' salaries is a bad idea.© BrainMass Inc. brainmass.com June 4, 2020, 1:57 am ad1c9bdddf
Problem: What are the problems caused by issuing 20-year bonds and using the proceeds to pay employees' salaries?
The first problem is that 20 year bonds create a long term liability for the issuing company. A long term liability is normally matched to long term assets. For example, a company might buy a building with long term debt or bond proceeds. In other words, a company might finance the purchase of a building with long-term debt or long-term bonds.
That makes sense because by the time the balance of the debt or bonds are due, the company has a long term asset that ...
This posting discusses the type of transaction and the effect to the balance sheet followed by six specific reasons why it is a bad idea. The explanation is given in 413 words.