Advantages And Disadvantages Of Debt Offerings

In this section; the reporter well define some key words and terminologies and also will mention some advantage and disadvantage of debt and equity issues in finance and the third section will discuss why debt offerings are much more common that equity offerings and finally will conclude the discussion.

Debt offerings are always referred to or defined as a note or bond that is offered by a company which needs to raise capital which means that the company needs to get some additional capital (Gitman, Joehnk & Smart, 2011).

The other important method by which to raise funds is through the offering of stock, or equity. If a company stiff tries to use a debt, as against to an Equity, the business does not weaken the ownership or income of the

That indicates how much the investor is actually lending the company until the maturity date. On that date, the company will then repay the principal amount to the investor. Principal is usually declared in $1,000 increments in general.

Equity offering is “Invitation by a firm (or its underwriters) to the general public (or to a select group of investors) to buy a new issue of common stock (ordinary shares)” (Business Dictionary)

In other hand, in order to compare obviously, we look advantages and disadvantages of each weather equity or debt. The companies have two ways to get money to start up a business or to grow up their business. Debt financing; such as long-term loans the company gets from the bank. Equity financing is private investor money that the company gets in exchange for a share of ownership in the business.

Advantages of

Although, you share the risks and liabilities of company’s ownership with the coming partners or investors. Since you don't have to pay liabilities and debts, and also you able to use the cash flow generated to further raise the company or to expand into other areas. Keep going or maintaining a low debt-to-equity ratio also allows you to get a better place to get a loan in the future when needed (Kokemuller, 2010).

Disadvantages of Equity

If a company chooses equity to invest it the company, the owner or the company gives up fractional ownership or partial ownership, however; some levels of having decisions authority over your business. When a company uses much stock investors frequently be adamant on placing representatives on business panel or in decision-making positions. If the company takes off, the company should share to a portion of company’s earnings with the shareholders investor. When you need to sharing the profits to other owners may go above what you would have repaid on a credit (Kokemuller, 2010).

In my point of view and based on literature the major reasons that the debt offering much more common then equity