Which of the Following Statements Regarding Debt and Equity Financing

question 3

Multiple Choice

Which of the following statements regarding debt and equity financing is FALSE?

• A)Dividend payments on equity financing are deductible by the corporation for tax purposes.
• B)Dividends are paid from after-tax corporate income.
• C)Interest income from debt financing is taxable in the hands of the investor.
• D)Interest payments on debt financing are deductible by the corporation for tax purposes.

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Definitions:

Linear Relationship

A direct correlation between two variables where a change in one variable is consistently associated with a proportionate change in the other.

Ratio Analysis

A financial analysis technique that uses ratios derived from a firm's financial statements to evaluate its financial condition and performance.

Qualitative Demand Forecasting

The process of predicting future demand for a product or service based on non-quantitative information such as expert opinions and market trends.

Nominal Group Technique

A structured method for group brainstorming that encourages contributions from everyone in the group and is used to generate and prioritize ideas.