Equity Financing Via Common Stock Can Be More Expensive Than

question 318

Multiple Choice

Equity financing via common stock can be more expensive than issuing bonds because

• A) common stocks must be insured.
• B) there is more administration involved.
• C) common stocks are backed by retained earnings.
• D) common stock must be sold through a broker.
• E) interest paid to bondholders is a tax-deductible business expense, but stock dividends are not tax-deductible.

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Definitions:

Role Differentiation

The process by which a society or group divides and specializes roles based on characteristics such as sex, age, occupation, or skill.

Unity

The state of being united or joined as a whole, especially in a political context.

Social Construction

The theory that many aspects of society, including knowledge, are created through cultural and social practices and not inherently natural or universal.

Reality

Pertains to the state or quality of having existence or substance; the sum of all that is real or existent within a system, as opposed to that which is only imaginary.