Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 13

For the following questions, circle the best response.

When choosing between issuing common stock and issuing bonds, managers of corporations should take into account

a. the tax advantages to the company of deducting the interest cost of bonds.

b. the demands placed on their company by stockholders who expect to be paid quarterly dividends.

c. the risks associated with having to make fixed interest payments on bonds at predetermined times.

d. the impact that the choice will have on their company’s financial leverage.

e. all of the above.

Step 1 of 6

(a)

When choosing between issuing common stock or bonds, managers of corporations should take into account the tax advantages to the company of deducting the interest cost of bonds.