The biggest disadvantage of bond financing is the dilution of ownership.

Question

Quizplus · Accepted Answer

The biggest disadvantage of bond financing is not the dilution of ownership. Bond financing does not result in the issuance of new equity shares, which would lead to dilution of ownership. Instead, it involves borrowing money by issuing debt securities (i.e. bonds) to investors who lend money to the company for a fixed period of time, usually at a predetermined interest rate or coupon rate. The primary disadvantage of bond financing is the obligation to make regular interest payments and repay the principal amount at maturity, which can increase the company's financial risk and reduce its flexibility.

The Biggest Disadvantage of Bond Financing Is the Dilution of Ownership