What is a disadvantage of issuing bonds compared to shares?

Question

Quizplus · Accepted Answer

When a company issues bonds, they must pay interest on a periodic basis regardless of their earnings, whereas with shares, there is no obligation to pay dividends until the company decides to declare them. This can be a disadvantage if the company is not generating enough cash flow to cover the interest payments on the bonds.

Answer: D 
 Bondholders have the right to call the bonds early, which can be a disadvantage for the company as they may be forced to pay back the bonds earlier than expected, leading to a potential liquidity crisis. With shares, there is no obligation to repay the shareholders until they decide to sell their shares.

Therefore, the correct answer is C and D.

What Is a Disadvantage of Issuing Bonds Compared to Shares