One advantage of using equity financing is dividends are discretionary, not an obligation like debt financing.A.TrueB.False

Advantages of debt financing over equity financing are that:Multiple Choicerepayment of debt principal is optional.interest payments on debt are not tax deductible.control is not diluted.more money is available.

3. Discuss the advantages and disadvantages of both debt and equity finance.

Which of the following is not an advantage of debt financing? Group of answer choices Shareholder control is not affected. Interest payments are cheaper than dividend payments. The return on shareholder’s equity may be higher. Interest is deductible from income for tax purposes.

Two advantages that debt financing has over financing from the issue of shares are:Group of answer choicesInterest expense can be claimed as a tax deduction and there is no dilution in share ownership.There is more profit available to pay dividends to shareholders and dividends can be claimed as a tax deduction.The principal must be paid back at maturity and dividends can be paid to shareholders because earnings per share increases.Interest payments on outstanding debt are required periodically and the interest expense can be claimed as a tax deduction.

Why do firms prefer not to issue equity?Multiple choice question.New equity increases the liability for dividend payments.Share prices tend to rise when equity is issued.New equity increases the probability of bankruptcy.Share prices tend to drop when equity is issued.