Why Is Debt Financing Said to Include a Tax Shield

question 66

Multiple Choice

Why is debt financing said to include a tax shield for the company?

• A)taxes are reduced by the amount of the debt
• B)taxes are reduced by the amount of the interest
• C)taxable income is reduced by the amount of the debt
• D)taxable income is reduced by the amount of the interest

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Definitions:

Coercive Power

A form of authority that relies on the threat of force or punishment to compel obedience.

Reward Power

is a form of influence where an individual has control over the distribution of rewards, motivating others to follow directions or achieve goals.

Referent Power

The influence one has over others because they respect, admire, or like the individual.

Organizational Learning

The process by which organizations acquire, improve, and manage knowledge to better adapt and succeed.