Debt Is Generally the Least Expensive Source of Capital

question 44

Multiple Choice

Debt is generally the least expensive source of capital. This is primarily due to

• A) the tax deductibility of interest payments.
• B) its position in the priority of claims on assets and earnings in the event of liquidation.
• C) the secured nature of a debt obligation.
• D) fixed interest payments.

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Definitions:

Liability Accounts

Accounts on a company's balance sheet that track what the company owes to others, such as loans payable, accounts payable, and mortgage payable.