As a business owner, I have several sources of finances including bonds loans, shares among others. The source of finance chosen is significant since it will affect several aspects of the business. The main and most common method is the loans from banks. However, loans from banks have a higher interest rate as compared to bonds. In addition, banks have restrictions including asking for collateral and business plan to show how the borrowed finances will be utilized.

Another method is the issuing of shares.  Issuing of shares means that profits made will be issued as dividends to the shareholders. In addition, the controlling power of the business lies with the board of directors in this case. Though the money raised from the issuance of shares does not need to be repaid back, there are other attractive propositions found in the issuance of bonds as compared to shares (Marston, 2014).

For bonds, the company can issue as much bonds as needed or as long as there are lenders willing to buy bonds. In addition, issuance of bonds does not affect the ownership of the company or how the company is run. Again, the issuing of bonds is very efficient and attracts a larger pool of lenders. Bonds can be short term or long-term based on the needs of the company.

After issuing bonds, all the cash transactions will be reported in the cash flow statement. The amount will be listed as an outflow in the investing activities section of the cash flow (Marston, 2014). Financial statement users will use this information to know how much debt the company has in terms of bonds issued. This is important in determining the viability of the company.

Reference

Marston, R. C. (2014). Investing in Bonds: The Wider Bond Market. Investing for a Lifetime: Managing Wealth for the “New Normal”, 129-143

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