Profitable Companies Often Prefer to Issue Debt Rather Than Preference

question 52

Multiple Choice

Profitable companies often prefer to issue debt rather than preference shares because [blank].

• A)debt creates less risk for the company
• B)interest payments are fixed but preferred shareholders expect dividends to grow
• C)preference shares dilute the voting rights of common shareholders but bonds do not
• D)interest on debt is deductible for tax purposes, but preferred dividends are not

---

Definitions:

Intrinsic Motivation

The drive to engage in an activity for its own sake and personal rewards, rather than for external rewards.

Basic Human Needs

Fundamental requirements necessary for individuals to live a healthy and well-adapted life, such as food, water, shelter, safety, and belonging.

Competence

The ability or skillset required to efficiently perform or complete a specific task or job.

Self-determination

The process by which an individual controls their own life, making choices and decisions based on their own preferences and interests rather than being influenced by external forces.