Bonds Are a Popular Source of Financing Because

question 173

Multiple Choice

Bonds are a popular source of financing because

• A)bond interest expense is deductible for tax purposes,while dividends paid on stock are not.
• B)financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock.
• C)a company having cash flow problems can postpone payment of interest to bondholders.
• D)the bondholders can always convert their bonds into stock if they choose.

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Definitions:

Effects On Other Parts

The impact that changes or actions in one segment or component have on other segments or components within a system or organization.

Proceeds From Sales

The total amount of money received by a company from selling goods, services, or assets.

Opportunity Costs

The cost of foregoing the next best alternative when making a decision. It represents the benefits an individual, investor, or business misses out on when choosing one alternative over another.

Fixed Costs

Expenses that do not change with the level of goods or services produced over the short term.