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Why would a business choose debentures as a source of funding? (A) To reduce financial risk (B) To provide security over assets (C) To retain ownership and control (D) To obtain cheap, short-term finance - HSC - SSCE Business Studies - Question 14 - 2014 - Paper 1
Question 14
Why would a business choose debentures as a source of funding? (A) To reduce financial risk (B) To provide security over assets (C) To retain ownership and contro... show full transcript
Worked Solution & Example Answer:Why would a business choose debentures as a source of funding? (A) To reduce financial risk (B) To provide security over assets (C) To retain ownership and control (D) To obtain cheap, short-term finance - HSC - SSCE Business Studies - Question 14 - 2014 - Paper 1
Step 1
To retain ownership and control
Answer
Choosing debentures as a source of funding allows a business to raise capital without having to give up ownership or control of the company. Unlike equity financing, issuing debentures means that the business does not have to dilute the ownership of existing shareholders. This is particularly appealing for business owners who want to maintain decision-making control and keep the integrity of their management structure intact.