Which of the Following Is a Disadvantage to Shareholders of Using

question 30

Multiple Choice

Which of the following is a disadvantage to shareholders of using long-term debt rather than equity?

• A) Interest is tax deductible.
• B) Lenders do not have voting rights.
• C) Lenders do not share in excess profits.
• D) Interest payments must be made on time regardless of a reduction in profitability.

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Definitions:

Total Surplus

The sum of consumer surplus and producer surplus, representing the total benefit to society from the production and consumption of goods and services.

Transplant Organs

Organs removed from one body and placed in another's body for the purpose of replacing a missing or defective organ.

Market

An economic system where goods and services are freely exchanged between buyers and sellers under competitive conditions.

Efficiency

The state or quality of being able to achieve maximum productivity with minimum waste or expense.