A Disadvantage of Issuing Stock Instead of Debt Is That

question 100

Multiple Choice

A disadvantage of issuing stock instead of debt is that stock:

• A)creates no interest expense which must be paid.
• B)is less risky to the issuing corporation.
• C)creates no liabilities for the corporation.
• D)generally results in lower earnings per share.

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Definitions:

Creditor Balances

The amounts owed by a business to its creditors, representing liabilities for goods, services, or loans provided to the business.

Cash Payments Journal

An accounting ledger that tracks all cash outflows or payments made by a business.

Revenue Journal

A specialized accounting journal used to record all sales transactions of a business, tracking the inflow of revenue.

Adjusting Journal Entries

Entries made in accounting records at the end of an accounting period to allocate income and expenditures to the correct period.