One Advantage of Issuing Bonds Instead of Stock Is That

question 133

Multiple Choice

One advantage of issuing bonds instead of stock is that:

• A)Interest is tax deductible,whereas dividends are not.
• B)Bonds have a longer maturity date.
• C)Interest rates are lower than dividend rates.
• D)The issuance of bonds does not affect earnings per share.

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Definitions:

Depreciate

The reduction in the value of an asset over time, often due to wear and tear or obsolescence.

Lease Term

The fixed, non-cancellable period during which a lessee has the right to use an asset, plus any options to extend or terminate the lease if reasonably certain to be exercised.

Lease Criteria

The conditions and standards that a contract must meet for it to be classified as a lease under accounting standards.

Incremental Borrowing Rate

The interest rate a lessee would have to pay to borrow on a collateralized basis over a similar term to lease a similar asset, relevant in lease accounting.