Which of the Following Is an Advantage of Debt Financing

question 41

Multiple Choice

Which of the following is an advantage of debt financing?

• A) The interest payments a firm makes on debt are a tax-deductible expense.
• B) A firm using debt financing is not required to make fixed payments.
• C) It is less risky than equity financing.
• D) It is more flexible than equity financing.

---

Definitions:

Computing Interest

The process of calculating the interest payment on a loan or investment based on the principal amount, rate, and time.

Maturity Date

The specified date on which the final payment of a loan, bond, or other financial instrument is due to be paid.

Issue Date

The date on which a financial instrument or document, such as a bond or a check, is issued and becomes effective.

National Credit Cards

Credit cards that are accepted within a specific country, which might not be valid for international transactions.