Explain advantages and disadvantages of non-convertible bonds
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List of Advantages of Convertible Bonds
1. Convertible bondholders receive only a fixed, limited income until conversion.
This is a great advantage for the company because a bigger chunk of the operating income is available to the common stockholders. If a company does well, it has to share its operating income only with the newly converted shareholders.
2. Voting control is in the hands of common stockholders.
Bond holders cannot vote for directors. So if the management level of a company is concerned about losing voting control of the business and need an alternative means of financing, selling convertible bonds will be more advantageous than using common stock for funding.
3. Bond interest is a deductible expense for the issuing company.
For example, if the company is in the 30 percent tax bracket, in effect the federal government needs to pay 30 percent of the interest charges in debt. So when a company is planning to raise new capital, convertible bonds are more advantageous than preferred stock.
4. They help a corporation in securing equity financing in a delayed manner.
Because it takes time for the bondholders to trade their bonds for stock, this delays the common stock and the earnings per share dilution.
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List of Advantages of Convertible Bonds
1. Convertible bondholders receive only a fixed, limited income until conversion.
This is a great advantage for the company because a bigger chunk of the operating income is available to the common stockholders. If a company does well, it has to share its operating income only with the newly converted shareholders.
2. Voting control is in the hands of common stockholders.
Bond holders cannot vote for directors. So if the management level of a company is concerned about losing voting control of the business and need an alternative means of financing, selling convertible bonds will be more advantageous than using common stock for funding.
3. Bond interest is a deductible expense for the issuing company.
For example, if the company is in the 30 percent tax bracket, in effect the federal government needs to pay 30 percent of the interest charges in debt. So when a company is planning to raise new capital, convertible bonds are more advantageous than preferred stock.
4. They help a corporation in securing equity financing in a delayed manner.
Because it takes time for the bondholders to trade their bonds for stock, this delays the common stock and the earnings per share dilution.
hope this answer helps you
please mark it as brainliest
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