Which of the Following Is One of the Main Advantages

question 99

Multiple Choice

Which of the following is one of the main advantages of using long-term debt financing instead of equity financing?

• A)Not having to pay back the principal
• B)Ability to raise large amounts of capital
• C)Tax-deductibility of interest
• D)Tax-deductibility of dividends

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Definitions:

Direct Materials

Raw materials that can be directly associated with the production of specific goods or services and are included in the cost of the finished product.

Fixed Overhead

The total of all costs that do not vary with production volume, including salaries, rent, and insurance.

Variable Overhead

Costs that fluctuate with production volume, such as utilities and indirect materials, which are not constant like fixed overhead costs.

Direct Labor

Labor costs directly attributable to the production of goods, including wages of workers who are actively involved in the manufacturing process.