A Disadvantage of Using Bonds Instead of Stock as a Method

question 41

Multiple Choice

A disadvantage of using bonds instead of stock as a method of long-term financing is that with bonds:

• A)interest must be paid regardless of the level of earnings.
• B)interest expense is tax deductible.
• C)bonds do not dilute stockholders' proportionate ownership.
• D)issuing bonds results in higher earnings per share than issuing common stock.

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