Which of the Following Is a Major Difference Between Debt

question 32

Multiple Choice

Which of the following is a major difference between debt financing and equity financing?

• A) Equity financing has a specific maturity period, whereas debt financing usually has no specific maturity period.
• B) Debt financing is not linked to organizational performance, unlike equity financing.
• C) Equity holders have primary claims on assets unlike debt financiers.
• D) Payments to equity holders reduce taxable income, whereas debt payments are not tax deductible.
• E) Debt financing is used to cover long-term expenses, whereas equity financing is used for current expenses.

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