One of the Most Important Factors in Making Debt Less

question 86

Multiple Choice

One of the most important factors in making debt less expensive than equity is:

• A) the seniority of equity obligations to debt claims.
• B) the tax deductibility of dividends.
• C) the tax deductibility of equity.
• D) the seniority of debt obligations to equity claims.

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Definitions:

Receivables Financing

A type of financing where a company uses its accounts receivable as collateral for a loan.

Carrying Cost

The total cost of holding inventory, including storage, insurance, taxes, depreciation, and opportunity costs.

Economic Order Quantity

A formula used in inventory management to determine the optimal order size that minimizes total costs related to acquiring, holding, and replenishing inventory.

Fixed Costs

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance premiums.