Not always true... some companies do it to improve "gearing" or
Return on Investment
Let say if you got 1 million you can only earn 12% i.e.
120,000
but if you can issue bonds of say 300,000
Now you capital you have is 1.3 million - you can earn 156,000 on
12%
but 156,000 you have to less interest on the money borrowed.say
(300,000X4%)
156,000- 12000 interest = 144,000
144,000 is still a better deal than the initial 120,000
But it becomes bad when a company borrows too much.
