the future growth of the company. If this company issues bonds or borrows money, it is obligated to

make interest payments, which can eat up the company’s cash. If the company issues stock, it is not

obligated to make payments to anyone (although it may choose to pay dividends).

c. Venture capitalists are private investors who can keep close tabs on the management and strategy of

the company—and thus reduce the problems of imperfect information about whether the firm is being

well run. Venture capitalists often own a substantial portion of the firm and have much better

information than a typical shareholder would.

2. From a firm’s point of view, a bond is very similar to a bank loan. Both are ways of borrowing money. Both

require paying interest. The major difference is who must be persuaded to lend money: a bank loan

requires persuading the bank, while issuing bonds requires persuading a number of separate
{"uploaded_via": "batch_uploader", "file_hash": "830b81f41611ac67a490444dbb5d6aed292224606965b06965b914443c93331a", "creator": "PDFMiner", "creationdate": "2022-12-07T14:15:44-06:00", "total_pages": 597, "batch_upload": true, "source_file": "downloads\\business\\economics\\Microeconomics3e.pdf", "source": "downloads\\business\\economics\\Microeconomics3e.pdf", "producer": "Prince 14.2 (www.princexml.com)", "file_size_mb": 26.99, "file_type": ".pdf", "upload_timestamp": "2026-02-07T15:24:38.309401", "file_name": "Microeconomics3e.pdf", "moddate": "2022-12-07T14:23:05-06:00", "title": "Principles of Microeconomics 3e"}