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Essay On Dottie's Grocery

1073 Words5 Pages

A) Introduction
Dottie’s Grocery must raise $23 million to maintain its current operation and grow. The company will need fixed-income security to raise money, whether stocks or bonds. They are considering which option will be better, either using bonds or going public and issuing shares offered in the stock market. “Selling stocks allows investors to buy shares of your company, which means they actually own a piece of it. Selling bonds means borrowing money from investors and paying interest to them. Each method works, but there are different consequences for how you run and grow your company (Johnston, 2023).”

B) Answer to what is asked.

Issuing a bond has its advantages and disadvantages. The advantages will be not sharing the ownership of a company and having flexibility in deciding when and how to issue the bonds (including duration, value, and interest rate, among others). Also, it is easier for investors to get bonds since they are less risky, and they can use interest payments as a tax deduction. The disadvantage can be that the company needs to share its financial statements. It can also cause high leverage. When the maturity is due, the company will have …show more content…

Selling stocks gives the company the advantage of having a debt by owing money to the investors. Also, it can raise its credit rating, which will help the company borrow money in the future. Conversely, the disadvantage is that the investors will own a part of the company, which means explaining to the shareholders since they have the right to demand explanations. This disadvantage has something positive on it, and it can help the company sharpen its focus and profitability. Another disadvantage is the dividend payment, which can be quarterly or monthly; if the company default on payments, the company’s reputation would be hurt. Selling stocks can bring tax consequences to a company (Johnston,

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