Each element of a company's capital structure has its advantages and disadvantages. Then, get together with the other members of your study team, and compare your answers. Characteristic Stocks Bonds Liquid, traded on established exchanges. Dilutes ownership of the company. Cash payments limited to specified interest, regardless of net income growth.
Payments are tax deductible.
Positive financial leverage is possible. Interest payments must be made. Initial amount invested must be paid back. Investors receive a return only if earnings are satisfactory. Although there were some doubts at the time about the company's ability to sell bonds with such a long life, the bonds sold very well.