From the viewpoint of a public limited company, which of the following is an advantage of issuing debentures over issuing shares to raise capital?
A. The company can raise more capital.
B. The existing shareholders have a better control of ownership of the company.
C. The company can pay less to debenture holders than to shareholders when its profit is small.
D. It is easier to obtain more bank loans of the company issues more debentures rather than more shares.
The answer is option B. But why?
THX!
Economic problem (about forms of business ownership)?
2011-06-08 12:47 pm
回答 (2)
2011-06-09 3:41 am
✔ 最佳答案
Debentures are loans which have to pay interest.But the creditors will not have ownership of the company. Only when the debentures cannot be paid, the company will go bankrupt by court order. The creditors will have rights to control and refurnish the company.
2011-06-08 9:58 pm
When companies issue equity they are selling ownership interests in the company, which dilutes the current owners' ownership.
Debt, on the other hand, is simply a liability - the lenders have no ownership interest.
Debt, on the other hand, is simply a liability - the lenders have no ownership interest.
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