Why do companies choose for state support rather than bank loans?

Expert Solution

Well this question has no perfect answer but i will try to answer it with opinion.

Companies primary objective always is to earn profit and increase the wealth of their shareholders. So how they could do it is always in their mind.

So at times of crisis or in hard times they want support from goverments. It is because taking bank loans will definately hit their balance sheet and also the interest rate burden will always there. On the other hand an government support is always tax free or you can also say interest free. So they can think to rebuild themselves with that suppost as we could saw in 2008 crisis.

Also there is some different prespective also. Banks are also not so encouragious to give loans in hard times to a company due to risk of default by them. So It is governements only who can help by enhancing their fiscal spending and companies also more encouragious to take that grant for bailout of something.

In normal times, this theory may not be work because even if company want to take support from governments but there is not such huge. But still they prefer to go with governements schemes etc.

this is my opinion based answer.

please like my answer if you like it.

thanks

jeff jeffy answered 1 year ago

2. Explain why companies issue bonds to finance operations. Why do companies prefer bonds than loans...

2. Explain why companies issue bonds to finance operations. Why do companies prefer bonds than loans when they need to borrow?

Why Do Companies Lease Rather Than Buy? Must consist of 150-200 words

Why might an auditor choose to test a sample rather than the entire population of an...

Why might an auditor choose to test a sample rather than the entire population of an account balance when performing audit testing? Do auditing standards justify the lower level of assurance obtained when using sampling rather than testing the entire population? Does the auditor’s report provide any indication that the assurance obtained is based on a sample of less than 100% of the population? Explain.

Why might it be rational for a developing country to choose protectionism rather than specialize in...

Why might it be rational for a developing country to choose protectionism rather than specialize in its area of comparative advantage? Why do developing countries argue that they are hurt by stringent protection of intellectual property? Why do developed countries argue that provisions for intellectual property are an important concern for multilateral trade agreements? Provide an argument as to why increased trade would improve the environment. Then provide one argument as to why increased trade might worsen the environment.

Explain why Xerox would choose to lease copiers in 1960 rather than sell them.

Why do we measure temperatures at the evaporator rather than the suction pressure?

Why is an independent central bank more likely to put emphasis on price stability rather than...

Why is an independent central bank more likely to put emphasis on price stability rather than on keeping unemployment low, compared with a central bank that is not independent?

What is a bank reconciliation and why is it important for companies to do it periodically?...

What is a bank reconciliation and why is it important for companies to do it periodically? B. Prepare a Bank Reconciliation Statement for XYZ company that has: • Bank statement of $9,000. • Cash account of $7,500. Additional information for the reconciliation:  Deposit in transit.  NSF Check.  Outstanding check.  Collections made by the bank. Required: provide an amount of each information to bring the adjusted balances to be equal . Q2- Assume that you have a...

There are two benefits for why individual investors would choose mutual funds rather than individual stock...

There are two benefits for why individual investors would choose mutual funds rather than individual stock purchases. The two benefits from the book are diversification and the expertise of mutual fund mangers. Look up Warren Buffet famous 10-year bet with a hedge fund manager in order to discuss how he would explain how we would choose mutual funds based on the benefits.

1. Why would a business choose an internal growth strategy rather than an external growth strategy?...

1. Why would a business choose an internal growth strategy rather than an external growth strategy? 2. What industry conditions would be most likely to lead a firm to pursue external growth? 3. In your opinion is an offensive or defensive collaboration more effective as a tool to gain competitiveness? Why? 4. What if a company chooses NOT to align with the dominant design that emerges in the latter stages of the life cycle—but instead chooses to continue to pursue...

Question