Explain bond with advantage and disadvantages
Dear student,
Bond or debenture is a document issued by company as a proof of money lent to it by the holder. It is an acknowledgement of debt.
Advantages of bond
From Company's point of view:
i) It is an economical source of raising finance.
ii) Interest paid on debentures are tax deductible.
iii) Debentures do not carry voting rights.
From debenture holder's point of view:
i) Interest on debentures are paid at fixed rate periodically.
ii) They carry safety of investment as bonds carry a charge on company's assets.
Disadvantages of bonds.
From company's point of view:
i) The company has to pay interest on bonds even at time of loss.
ii) Bonds involve mortgage of assets.
From debenture holder's point of view:
i) Debenture holders do not carry voting rights.
ii) Unit price of bonds are high, it is not attractive for small investors.
Regards
Bond or debenture is a document issued by company as a proof of money lent to it by the holder. It is an acknowledgement of debt.
Advantages of bond
From Company's point of view:
i) It is an economical source of raising finance.
ii) Interest paid on debentures are tax deductible.
iii) Debentures do not carry voting rights.
From debenture holder's point of view:
i) Interest on debentures are paid at fixed rate periodically.
ii) They carry safety of investment as bonds carry a charge on company's assets.
Disadvantages of bonds.
From company's point of view:
i) The company has to pay interest on bonds even at time of loss.
ii) Bonds involve mortgage of assets.
From debenture holder's point of view:
i) Debenture holders do not carry voting rights.
ii) Unit price of bonds are high, it is not attractive for small investors.
Regards