A major disadvantage resulting from the use of bonds is that
A) earnings per share may be lowered.
B) interest must be paid on a periodic basis.
C) bondholders have voting rights.
D) taxes may increase.

Question

Quizplus · Accepted Answer

The major disadvantage resulting from the use of bonds is that interest must be paid on a periodic basis. This can be burdensome for companies that have issued a large amount of debt, as interest payments can cut into profits and potentially lead to financial distress if the company is unable to make its payments. The use of bonds requires the payment of interest on a periodic basis, which can result in increased financial obligations and reduced cash flow for the organization. This may restrict its ability to allocate funds towards other important expenditures. Option A, C, and D are incorrect because they do not relate to the disadvantage of using bonds.

A Major Disadvantage Resulting from the Use of Bonds Is