Final answer:
Organizations issue bonds to raise large sums of capital, which is optimal for large or well-established firms needing to finance big investments or acquisitions. Bonds have the advantage of reaching a broad investor base compared to the more relationship-based and customized lending that banks offer to smaller or less well-known firms.
Step-by-step explanation:
An organization might choose to issue bonds instead of borrowing from a bank for several reasons. When a company requires significant amounts of capital, bonds can be an effective means to raise new financial capital due to their ability to reach multiple investors, unlike bank loans which require the lender's approval.
This is especially true for large and well-known firms that may need to finance substantial investments, pay off old bonds, or facilitate the acquisition of other firms. Although bank borrowing offers a more customized and relational approach to lending, which is suitable for smaller or lesser-known enterprises, issuing bonds provides a standardized way of acquiring large sums of money, which can be more advantageous for larger, established companies. Moreover, the bond market allows a firm to tap into a wide pool of investors as opposed to the limited arrangement with a single banking institution.