From the Point of View of the Business, Which of These

question 23

Multiple Choice

From the point of view of the business, which of these is an advantage of using long-term debt rather than equity in financing?
I. It does not dilute the control of existing owners.
II. Creditors do not share in any excess profits of the entity.
III. Interest payments are a fixed commitment regardless of profits.
IV Interest is tax deductible.

• A) I, II, III, IV
• B) I, IV
• C) I, II, IV
• D) I

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Definitions:

Quantity

The amount or number of a material or immaterial good considered as a unit or an aggregate.

Price

The amount of money needed to buy a particular good, service, or resource.

Opportunity Cost

The cost of forgone alternatives; the value of the next best choice that one gives up when making a decision.

Keg

A keg is a small barrel traditionally used for transporting and storing large quantities of liquid, especially beer.