Alternative Sources Of Cash Essay

1081 WordsMar 22, 20115 Pages
Subject: Case 3.9 Alternative Sources of Cash Sandra Madsen, the founder and the owner of a major portion of stock for Computer Technology would like to open four new offices. She is purposing the company issues bonds to raise enough capital to pay for the four new offices. However, Emily Christenson, who owns 35% of the stock, but does not work in the company, would prefer to raise the money by issuing stock. Emily would like the company to issue stock so that she can purchase all the shares and take control of the company. Before any decision is made into whether to issue bonds or stock to raise capital to pay for expansion we need to look at the impact of both scenarios on the company. In addition, we need to consider why Sandra and Emily prefer their way over the other; who will benefit and who will be negatively impacted. The company does have a responsibility to its employees, its customers, and other stockholders to assure the demands of those who will hold debt and/or shares of stock in the company. I took both options into consideration, and weighed the impact of each. I considered the impact each would have on the company, employees, creditors, investors, current stockholders and possible future bond and/or stockholders. First, I considered the issuance of bonds. Bonds are a form of interest-bearing notes payable. They are used to obtain a large amount of long-term capital. Bonds have a pre-determined price upon issue, but markets determine their price thereafter. The bond issuer pays the bondholder interest payments on the debt until the date of maturity, at which time the investor will cash in the bond and receives the face value of the bond back. A company will issue bonds when they are certain that they can generate the money to cover the interest payment to the bondholders. This would provide the company with needed capital to provide interest

More about Alternative Sources Of Cash Essay

Open Document