Which of the Following Is a Disadvantage of Issuing Bonds

question 49

Multiple Choice

Which of the following is a disadvantage of issuing bonds instead of common shares?

• A) Shareholder control is not affected.
• B) The principal of the debt must be repaid at maturity.
• C) Income to common shareholders may increase.
• D) Earnings per share will increase.

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Definitions:

Failure to Pay

A situation where an individual or corporation does not meet the due date for payment of taxes owed, potentially resulting in penalties.

Automatic Extension

An allowance by the IRS that gives taxpayers an additional period to file their tax returns without penalty.

Tax Return

A document filed with a tax authority that reports income, expenses, and other relevant financial information, used to calculate tax liability.

Marginal Tax Rate

The rate at which the last dollar of a taxpayer's income is taxed, indicating the rate of tax applied to their highest level of income.