Which of the following are correct statements: a) One disadvantage of equity fin

Question

Which of the following are correct statements:

a) One disadvantage of equity financing is the legal obligation to pay dividends.

b) One disadvantage of debt financing is the legal obligation to pay interest as well as principal to amortize the debt.

c) One good thing about issuing stock is that the dividends are tax deductible.

d) One good thing about issuing bonds is that the interest paid is tax deductible.

e) The Troubled Asset Relief Program of $700 Billion that Congress passed in response to the recent financial crisis was strictly used to bolster and bail out banks.

a) One disadvantage of equity financing is the legal obligation to pay dividends.

b) One disadvantage of debt financing is the legal obligation to pay interest as well as principal to amortize the debt.

c) One good thing about issuing stock is that the dividends are tax deductible.

d) One good thing about issuing bonds is that the interest paid is tax deductible.

e) The Troubled Asset Relief Program of $700 Billion that Congress passed in response to the recent financial crisis was strictly used to bolster and bail out banks.

Explanation / Answer

a: Incorrect- Dividend payment is optional, no legal obligation

b. Correct

c. Incorrect- Dividends are not tax deductible

d. Correct

e. Correct

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