Which of These Is Not an Advantage of Using Borrowed

question 23

Multiple Choice

Which of these is not an advantage of using borrowed funds to finance a business?

• A)Interest on borrowings is tax deductible.
• B)Borrowing can be used to boost returns to owners, as long as the return on the funds exceeds the cost of interest.
• C)Lenders do not dilute ownership interest in the business.
• D)Interest on borrowing is a legal commitment that must be met.

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Definitions:

Lack of Capital

A situation where there is insufficient financial resources or investment to fund current operations or expand a business.

Legal Structure

The organizational form a business takes, which can affect liability, taxation, and regulatory obligations.

Employee Retention

The ability of an organization to retain its employees and reduce turnover by creating a positive working environment and offering incentives.

Gain

An increase in wealth, resources, or advantages, often realized through investment, business operations, or other economic activities.