Which of the Following Reasons Causes Bonds to Be a Less

question 35

Multiple Choice

Which of the following reasons causes bonds to be a less expensive form of capital for a public firm than the issuance of ordinary shares? Bondholders

• A)bear less risk than ordinary shareholders bear.
• B)have prior voting rights over ordinary shareholders.
• C)receive greater returns than ordinary shareholders.
• D)investors pay a lower tax rate on bond interest

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Definitions:

Inventory

Items held for sale in the ordinary course of business, as well as supplies and materials used in producing goods for sale.

Gross Profit

The profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Absorption Costing

A pricing strategy that encompasses all expenses associated with production, including direct materials, direct labor, as well as both variable and fixed overhead costs, in the product's price.

Operating Income

A measure of a company's profitability from its core business operations, excluding revenue and expenses from non-operational activities.