A Disadvantage of Using Bonds Instead of Stock as a Method

question 41

Multiple Choice

A disadvantage of using bonds instead of stock as a method of long-term financing is that with bonds:

• A)interest must be paid regardless of the level of earnings.
• B)interest expense is tax deductible.
• C)bonds do not dilute stockholders' proportionate ownership.
• D)issuing bonds results in higher earnings per share than issuing common stock.

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Definitions:

Listed Payee

An entity or individual named in a document, such as a check or policy, who is authorized to receive the specified funds or benefits.

Misspelled Name

An error in the spelling of a name on a document or record, which can sometimes complicate legal or official transactions.

Good Faith

The principle of acting with honesty, fairness, and sincerity in dealings without any intent to deceive or defraud.

UCC

The Uniform Commercial Code, a comprehensive set of laws governing commercial transactions in the United States, aimed at harmonizing laws across the states.