Which of These Is Not an Advantage of Using Borrowed

question 14

Multiple Choice

Which of these is not an advantage of using borrowed funds to finance a business?

• A) Lenders do not dilute ownership interest in the business.
• B) Interest on borrowing is a legal commitment that must be met.
• C) Interest on borrowings is tax-deductible.
• D) Borrowing can be used to boost returns to owners as long as the return on the funds exceeds the cost of interest.

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Definitions:

Marginal Utility

The added satisfaction or usefulness received from consuming one more unit of a good or service.

Total Utility

The total satisfaction received from consuming a certain amount or combination of goods and services.

Money Income

The total amount of monetary earnings or receipts received by an individual or household from various sources before taxes.

Utility-Maximizing

Utility-maximizing is a principle in economics where individuals or entities choose the options that provide the highest satisfaction or utility from the available choices, given their preferences and constraints.