The Two Major Advantages of Getting a Loan Versus Investment

question 16

Multiple Choice

The two major advantages of getting a loan versus investment capital are ________.

• A) the money doesn't have to be paid back and lenders typically take an active interest in their borrowers
• B) banks are reliable sources of funding for startups and interest payments are tax deductible
• C) the money doesn't have to be paid back and no ownership in the firm is surrendered
• D) no ownership in the firm is surrendered and interest payments are tax deductible
• E) banks are reliable sources of funding for startups and lenders typically take an active interest in borrowers

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Definitions:

Fair Value

An estimate of a security's worth on an open market, based on what a knowledgeable, willing, and unpressured buyer would likely pay to a knowledgeable, willing, and unpressured seller.

Adjusting Entry

These are journal entries made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred.

Bonds Pay Interest

A statement indicating that bond issuers periodically make interest payments to bondholders.

Semiannually

Refers to an event or action that occurs twice a year.