Which of the Following Is an Advantage of Debt Financing

question 77

Multiple Choice

Which of the following is an advantage of debt financing?

• A) Interest charges on debt is very minimal.
• B) Interest charges on debt are tax deductible.
• C) Interest charges on debt are based on the net income of the firm.
• D) The higher the interest charges, the lower the bankruptcy costs.
• E) Firms that are entirely debt financed have to pay very minimal taxes.

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Definitions:

Unconscious Conflicts

Internal struggles, often stemming from childhood, that one is not fully aware of but which affect behavior and emotions.

Psychoanalysis

A therapeutic approach and theory of psychotherapy developed by Sigmund Freud that emphasizes unconscious processes and childhood experiences in understanding and treating psychological disorders.

Insight Therapies

Therapies that aim to improve psychological functioning by increasing a person’s awareness of underlying motives and defenses.

Psychological Functioning

Refers to the mental processes and behaviors that encompass emotional, cognitive, and social aspects of an individual's well-being.