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.

---

Definitions:

Simplistic

An overly simple view or explanation of something that does not account for all the complexities involved.

Social Desirability

The tendency of respondents to answer questions in a manner that will be viewed favorably by others.

Misrepresent

To give a false or misleading representation of facts or information.

Withdrawn Feedback

Feedback that has been retracted or withheld, particularly in contexts where it might have been expected or solicited.