Which of the Following Is a Disadvantage of Debt Financing

question 17

Multiple Choice

Which of the following is a disadvantage of debt financing?

• A) Dividends must be paid.
• B) It requires shareholders to invest more money.
• C) Fixed payments are required.
• D) The tax rate is higher.

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Definitions:

Competition

The rivalry among businesses to attract customers and achieve higher sales, profits, and market share.

Discounted Future Profits

The present value of a company's projected future profits, adjusted for time and risk.

Undiscounted Future Profits

The projected earnings from an investment over time without adjusting for present value or future risk.

Inventory

The total amount of goods and materials held in stock by a business, warehouse, or point of sale.