In addition, bonds allow organizations to stabilize their finances by ensuring they have significant debts on a fixed interest rate. The benefit of this is that it protects companies from the adverse effects of variable interest rates and economic changes (Boshkoska, 2016). When an organization issues stock as a mechanism to raise capital, more often than not, it will be forced to issue additional shares to facilitate this venture. When this happens, the value of the existing shareholdings gets diluted. Using bonds to raise capital allows an organization to avoid such an issue. Using bonds also has its set of downsides. Once a company issues bonds, it has to remit regular payments to the bondholders (Boshkoska, 2016). Even though such interest does not change, organizations are required to make such payments even when they do not make any profits. Courtesy of this, an organization’s share value might go down, especially during loss-making tenures. This is because bond interest remittances are normally effected before the payment of dividends.
