For a Firm with Long-Term Debt, Net Income Is Equal

question 42

Multiple Choice

For a firm with long-term debt, net income is equal to:

• A) Pretax income - Interest expense - Taxes.
• B) Dividends + Addition to retained earnings.
• C) EBIT - Taxes.
• D) Taxes + Addition to retained earnings.
• E) Pretax income * (1 - Marginal tax rate).

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Definitions:

Collateral

Property or assets that a borrower offers to a lender to secure a loan.

Guarantor

is an individual or entity that agrees to be responsible for another's debt or performance under a contract, if the original party fails to meet their obligations.

Principal Debtor

The main individual or entity obligated to repay a debt or loan in the terms of a financial agreement.

Principal Debtor

The main individual or entity legally obligated to repay a debt or loan in accordance with the terms of the agreement.