Which of the Following Statements Is Correct

question 65

Multiple Choice

Which of the following statements is correct?

• A) With no taxes and no bankruptcy costs, debt is more costly than equity.
• B) Bankruptcy costs are a disadvantage to debt.
• C) Bankruptcy costs may offset the tax benefit of debt.
• D) All of the above.
• E) b and c

---

Definitions:

Partnership

A sanctioned form of business where partners collectively manage the enterprise and split the financial gains.

Contracts

Contracts that engage two or more persons in binding commitments recognized and updatable through legal proceedings.

RUPA

The Revised Uniform Partnership Act, a set of laws adopted by some states to govern the operation of partnerships.

Dissociation

In a legal context, the process by which a member is removed from a partnership or limited liability company.