The Advantages of Obtaining Long-Term Funds by Issuing Bonds, Rather

question 108

Multiple Choice

The advantages of obtaining long-term funds by issuing bonds, rather than issuing additional common stock, include which of the following?

• A) Interest payments are tax deductible to the company, while dividends are not.
• B) The risk of going bankrupt decreases.
• C) Expansion is achieved without surrendering ownership control.
• D) a. and c.

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Definitions:

Profit-Maximizing Price

The price level at which a business can sell its product or service to achieve the highest possible profit.

ATC Curve

represents the Average Total Cost of production, showing how costs change with changes in output level.

Profit-Maximizing Monopoly

A monopolistic entity that adjusts its production volume and price to achieve the highest possible profits.

Price Per Unit

The cost assigned to a single unit of a product or service, used to determine the total price for a specific quantity.