When a company needs funds to finance the expansion of its operations, which of the following is not an advantage of issuing bonds rather than issuing stock?
A)Stockholders remain in control as bondholders cannot vote or share in the company's earnings.
B)Interest expense is tax deductible but dividends are not.
C)Bonds can usually be issued at a low interest rate and the proceeds can be invested to earn a higher rate.
D)The dates for the interest and maturity payments are fixeD.The fixed payment dates create inflexibility and therefore increase bankruptcy risk.

Question

Quizplus · Accepted Answer

The other three options are advantages of issuing bonds rather than issuing stock, but option D is not an advantage as fixed payment dates can increase bankruptcy risk by creating inflexibility.

When a Company Needs Funds to Finance the Expansion of Its