Answer to Question #64808 in Accounting for Jay

Question

(a) As a source of long term financing, what are the major advantages of bonds over common stock?
(b) What are the major disadvantages in using bonds for long-term financing?

If you had to somehow acquire new monies for your business, which would you use, stocks or bonds?

Answer 1

a. Using bonds as a source of long-term financing allows avoiding division of control over the company between the shareholders.
b. Bonds are the source of debt financing, which may be expensive, especially in the existing conditions of economic crisis.