One Potential Advantage of Financing Corporations Through the Use of Bonds

question 86

Multiple Choice

One potential advantage of financing corporations through the use of bonds rather than common stock is

• A) the interest on bonds must be paid when due
• B) the corporation must pay the bonds at maturity
• C) the interest expense is deductible for tax purposes by the corporation
• D) a higher earnings per share is guaranteed for existing common shareholders

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Definitions:

Plaster

Plaster is a building material used for coating, protecting, and decorating walls and ceilings; it can also refer to medical or artistic uses.

Labor

Labor refers to the use of both physical and mental human efforts in creating goods and services.

Positive Supply

A situation where an increase in price leads to an increase in the quantity supplied, holding other factors constant.

Cockatoos

A group of bird species known for their distinctive crests and social behavior, not directly related to economic terms.