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In Business / College | 2025-07-07

A disadvantage of bond financing versus equity financing is that bonds require payment of both periodic interest and the par value at maturity, while equity does not require payments.

True or False

Asked by sacalles05

Answer (2)

The statement that bonds require periodic interest and par value repayment, while equity does not, is true. Bond financing creates fixed obligations compared to equity financing where payments are contingent upon profits. This difference highlights a key disadvantage of bond financing over equity financing. ;

Answered by GinnyAnswer | 2025-07-07

The statement is true; bond financing requires fixed payments of interest and principal, creating a financial obligation, whereas equity financing does not require such fixed payments. This illustrates a key disadvantage of bonds compared to equity. Therefore, bond financing can be riskier for companies in terms of cash flow obligations.
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Answered by Anonymous | 2025-07-10

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