Question

When a company needs funds to finance the expansion of its operations, which of the following is not an advantage of issuing bonds rather than issuing stock? Question 1 options: Stockholders remain in control as bondholders cannot vote or share in the company's earnings. Interest expense is tax deductible but dividends are not. Bonds can usually be issued at a low interest rate and the proceeds can be invested to earn a higher rate. The dates for the interest and maturity payments are fixed.

Answer 1

Answer:

The dates for the interest and maturity payments are fixed.

Explanation:

When a company issues bonds instead of stock, one of the disadvantages of doing so is that they have to pay the coupons or the full face value of the bonds at specific dates. Either they pay coupons annually or semiannually,  and the face value is paid at maturity.

Since the dates are set beforehand, the company has to have the funds for these payments set aside. Instead, if the company would have issued stock, it would have greater freedom in deciding when and how much it should pay as dividends.