Ideally,corporations Try to Create Securities That Have the Tax Benefits

question 38

Multiple Choice

Ideally,corporations try to create securities that have the tax benefits:

• A)of equity but the bankruptcy benefits of debt.
• B)and bankruptcy benefits of debt.
• C)and bankruptcy benefits of equity.
• D)of debt and the equity benefits of dividends.
• E)of debt but the bankruptcy benefits of equity.

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Definitions:

Times Interest Earned Ratio

A financial metric that compares a company's operating income to its interest expenses, used to evaluate its ability to meet its interest obligations.

Solvency

The ability of an entity to meet its long-term financial obligations and continue its operations indefinitely.

Leverage

Refers to the use of borrowed funds to finance the acquisition of assets, aiming to increase the returns to equity shareholders.

Return On Assets Ratio

A financial metric measuring how efficiently a company generates profit from its assets, calculated as net income divided by total assets.