A disadvantage of using bonds instead of stock as a method of long-term financing is that with bonds:
A)interest must be paid regardless of the level of earnings.
B)interest expense is tax deductible.
C)bonds do not dilute stockholders' proportionate ownership.
D)issuing bonds results in higher earnings per share than issuing common stock.

Question

Quizplus · Accepted Answer

Interest payments on bonds are obligatory and must be paid regardless of the company's earnings, which can be a financial burden during periods of low profitability.

A Disadvantage of Using Bonds Instead of Stock as a Method