Final answer:
The finance manager of ABC Company can choose to raise capital by issuing bonds or shares. Issuing bonds requires regular interest payments and is suitable if the firm wants to retain control, while issuing shares dilutes ownership but does not require fixed payments.
Step-by-step explanation:
When a company like ABC Company needs to raise capital for projects such as developing an environmental-friendly production technique, the finance manager can suggest different options. Issuing bonds and issuing shares (or stock) are two such methods. If the company issues bonds or borrows money, it is obligated to make interest payments regardless of its income levels, which can affect cash flows, especially if profits are low. However, this allows the company to maintain full control over its operations without adding shareholders with decision-making power.
On the other hand, issuing stock involves selling company ownership to the public and becoming accountable to the new shareholders and a board of directors. This does not entail regular payments like interest on bonds, so it can be a preferable route for a company with fewer profits wishing to reinvest back into growth. However, this dilutes the ownership and could shift control away from the current owners if a large enough share is sold.