Bonds are a far more important source of financing than are stocks B. Financial intermediaries such as banks are the least important source of external funds for businesses C. Since 1970, more than half of the new issues of stock have been sold to American households D. Stocks and bonds combined supply more than one-half of the external funds

Question

Rebekah Sandoval

Business

3 September, 20:54

Bonds are a far more important source of financing than are stocks B. Financial intermediaries such as banks are the least important source of external funds for businesses C. Since 1970, more than half of the new issues of stock have been sold to American households D. Stocks and bonds combined supply more than one-half of the external funds

+3

Answers (1)

Know the Answer?

Gideon · Answer 1

Bonds are a far more important source of financing than are stocks

Explanation:

There is so much of risk associated with the issue of stock. Though it is essential for any business to issue some stock, but bonds are always favorable as they have a defined maturity, defined amount associated, and defined interest payment.

There is no direct payment of interest in bonds but the expense is to be recorded in books as per the matching and accrual principle.

The discounted value of interest to be paid on maturity is recorded.

Further, there is a tax benefit on bond payments.