Which of the Following Is a Major Disadvantage to the Firm

question 3

Multiple Choice

Which of the following is a major disadvantage to the firm of preference share capital?

• A) Tax is not payable on the firm's profit before the deduction of the preference dividend.
• B) The cost to the company is lower than is available through bond issues.
• C) The higher risk causes preference shareholders to demand a higher level of return than debt holders.
• D) There are limits to safe levels of borrowing.

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Definitions:

Time Periods

Specific intervals or spans of time during which certain events or measurements are taken or analyzed.

Indicator Variables

These are binary variables used in statistical models to represent the presence (with a value of 1) or absence (with a value of 0) of a particular condition or characteristic.

Seasonal Variations

Refers to fluctuations in data or activities that occur regularly based on seasonal changes throughout the year.

Trend Component

A component of time series data that represents the consistent, long-term direction of the data over time.