Module 5 Critical Thinking Assignment

Cover Page
Student Name:
Student Number:
Topic: Stock or Bond: The Company Perspective
Table of Contents
1. Body of Report:
(a). Advantages of Bonds.
(b). Disadvantages of bonds.
(c). Potential for Earning.
(d). Risk
(e). Access to funds
(f). Tax Implications
2. References
Body of the Report
A bond is a financial instrument used by the companies to raise finance from the Investors. It is different from Shares as Bonds are a fixed period loan given by the Investor against which the company pays annual interest and the principle is paid at the end of the bond term. Bonds are generally issued by the companies against the security of assets of the company over which the bond holders have the right to sell and recover their money if the company defaults in making the interest or principal payment.
The Advantages of the bonds are as under:
1. The biggest advantage of issuing the bonds to a company is that the company is able to raise money for their needs without changing the ownership structure of the company.
2. The Interest payment made by the company on the bonds is tax deductible. This means that the company is able to reduce the payment made to bond holders to reduce the tax liability of the company.
3. The cost of issuing the bonds to the company is very low. Since the bond market has high liquidity it is very easy for a company to float the bonds in the market at a very low cost, generally at the cost lower...