Artisan Tools Inc., manufactures and sells quality hand tools to commercial and consumer users. Due to an excellent marketing campaign, the business is growing quickly. After careful consideration the board decides that a new factory needs to be built to accommodate current and future business. This factory will cost millions of dollars. In order to fund this project, the board has decided to issue and sell bonds and debentures. What is the difference between a bond and a debenture, and why might they be more advantageous than simply obtaining a commercial bank loan to finance the factory?

Question

Quizplus · Accepted Answer

The Answer of Artisan Tools Inc., manufactures and sells quality hand tools to commercial and consumer users. Due to an excellent marketing campaign, the business is growing quickly. After careful consideration the board decides that a new factory needs to be built to accommodate current and future business. This factory will cost millions of dollars. In order to fund this project, the board has decided to issue and sell bonds and debentures. What is the difference between a bond and a debenture, and why might they be more advantageous than simply obtaining a commercial bank loan to finance the factory?