Today, LTG Goldrock will share with you the advantages and disadvantages of bonds ~
advantage
(1) Low capital cost
The interest of bonds can be paid before tax , which has a tax deduction effect. In addition, bond investment people are lower than stock investment people's investment risks, so their required returns are also low.Therefore, the capital cost of corporate bonds is lower than ordinary shares .
(2) Have financial leverage
The interest of bonds is a fixed cost. Bond holders Except for obtaining interest, they cannot participate in the distribution of net profit of the company. Therefore, they have financial leverage.The income of shareholders increases faster.
(3) The funds raised are long -term funds
The funds raised by the issuance of bonds are generally long -term funds and can be used for enterprises for more than 1 year, which provides strong financial support for enterprises to arrange investment projects.
(4) The scope of bond fundraising is wide and large
The targets of bond funds are very wide. It can not only raise funds from various banks or non -bank financial institutions, or raise funds from other legal entities and individuals. Therefore, fundraising is easier to raise funds with large amounts.
shortcoming
(1) Financial risk Great
Bonds have a fixed date of maturity and fixed interest expenses. When the corporate capital turnover is difficult, it is easy to put the enterprise into a financial dilemma and even go bankrupt.Therefore, when fundraising enterprises are issued by bonds , they must consider the stability and growth of the future income of investment projects raised by bond fundraising methods .
(2) Restricted clauses , lack of flexibility for funds
Because creditors do not participate in corporate management rights, in order to ensure the security of the creditor's claims, they usually include various restricted terms in the bond contract.These restricted terms will affect the flexibility of the use of corporate funds.
