Which of the Following Is Not a Disadvantage of Raising

question 80

Multiple Choice

Which of the following is not a disadvantage of raising capital through the issue of bonds payable?

• A)the bonds are classified as a long-term liability
• B)interest must be paid even if the firm suffers a loss
• C)the face amount must be repaid at maturity
• D)interest is deductible for income tax purposes

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Definitions:

Straight Line Amortization

A method of allocating an asset's cost evenly across its useful life.

Fair Values

An estimate of the market value of an asset or liability based on current market prices or valuations.

Retained Earnings

The cumulative amount of profits that a company has earned, less any dividends or other distributions to shareholders over its life.

Investment in Stanton Inc.

The total financial outlay made by an entity to purchase shares or a stake in Stanton Inc., reflecting an investment decision.