Question

One potential advantage of financing corporations through the use of bonds rather than common stock is: ______________

a. the corporation must pay the bonds at maturity
b. the interest on bonds must be paid when due
c. a higher earning per share is guaranteed for existing common shareholders
d. the interest expense is deductible for tax purposes by the corporation.

Answer 1

d. the interest expense is deductible for tax purposes by the corporation.

Step-by-step explanation:

Corporate finance can be regarded as division of finance which handles the way corporations deal with activities such as investment decisions as well as funding sources and capital structuring. Corporate finance primarily deals with maximization of shareholder value by the use of long and short-term financial planning as well as implementation of various strategies. financing of corporations could be through the use of bonds as well as use of common stock.

There are different advantages that is associated to issuing bonds instead of issuing shares of common stock, is that Interest that comes on bonds as well as other debt is deductible as regards to the income tax return of the corporation while the dividends that comes on common stock are not regarded as deductible on the income tax return. It should be noted that One potential advantage of financing corporations through the use of bonds rather than common stock is the interest expense is deductible for tax purposes by the corporation.