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:

Econometrics

The application of statistical and mathematical models to analyze economic data and test hypotheses.

Empirical Economics

The branch of economics that analyzes data to develop verifiable theories or evaluate economic policies.

Economic History

The study of economies or economic phenomena in the past.

Aggregate Price Level

A measure of the overall level of prices of goods and services in an economy over a specified period, often used as an indicator of inflation.