Why would a corporation issue bonds payable instead of issuing stock?
A)Debt is a less expensive source of capital than stock.
B)Borrowing by issuing bonds payable carries no risk to the company.
C)Debts affect the percentage of ownership of the corporation by the stockholders.
D)Debts don't carry any cost.

Question

Quizplus · Accepted Answer

Issuing bonds payable typically carries a lower cost of capital than issuing stock, as bondholders are guaranteed a fixed interest rate and the repayment of their principal, while shareholders are not guaranteed any returns. Additionally, issuing bonds does not dilute ownership of the corporation, as stock issuance would.

Why Would a Corporation Issue Bonds Payable Instead of Issuing