Question

question 3

after beginning with crowdfunding, amma decided to issue corporate bonds to finance expansion.

why would this be a suitable choice?

bonds are suitable only for short-term cash flow requirements.
bonds involve relinquishing ownership control.
bonds confirm consumer demand prior to production.
bonds offer long-term funding that comes with interest payments, which are tax deductible.

Explanation:

Analyze corporate bonds characteristics

Using the Long-Term Debt Financing knowledge point

Corporate bonds are long-term debt instruments issued by companies to raise capital for expansion. Unlike equity financing, issuing bonds does not dilute ownership control. Additionally, the interest paid to bondholders is a tax-deductible business expense, reducing the company's overall tax liability.

Evaluate the given options

• Option 1: Bonds are long-term, not short-term, financing instruments.
• Option 2: Bonds represent debt, so they do not relinquish ownership control.
• Option 3: Crowdfunding, not bonds, is typically used to confirm consumer demand prior to production.
• Option 4: Correctly states that bonds offer long-term funding with tax-deductible interest payments.

Answer:

• Bonds are suitable only for short-term cash flow requirements.
• Bonds involve relinquishing ownership control.
• Bonds confirm consumer demand prior to production.
• Bonds offer long-term funding that comes with interest payments, which are tax deductible. (Correct answer)