The-definition.com

Definition

Bonds

Bonds are a form of interest-bearing notes payable issued by corporations, universities, and governmental entities. Bonds offer three advantages over common stock, as shown in Illustration below:

 

Advantages of Bonds

1.      Stockholder control in not affected.

Bondholders don’t have voting rights, so current owners (stockholders) retain full control of the company.

2.      Tax savings result.

Bond interest is deductible for tax purposes dividends on stock are not.

3.      Earnings per share may be higher.

Although bond interest expense reduces net income, earnings per share o common stock often is higher under bond financing because no additional shares of common stock are issued.

Share it:  Cite

More from this Section

  • Normal balance
    The normal balance of an account is on the side where an increase in the account is recorded. ...
  • Standard Deduction
    A Standard Deduction is a defined amount of money that taxpayers may utilize to lower ...
  • Limited liability companies (LLC)
    A hybrid form of business organization with certain features like a corporation and others ...
  • Other expenses and losses
    A non operating activities section of the income statement that shows expense from auxiliary ...
  • Efficient Auditing
    Efficient Auditing is generally conducted in case of public enterprises to see whether ...