An advantage of issuing debt instead of equity is that
A) interest must be paid, regardless of earnings.
B) the interest is tax deductible.
C) it increases solvency or liquidity risks.
D) no leverage is possible.

Question

Quizplus · Accepted Answer

The interest paid on debt is tax deductible, which can reduce the overall tax liability of the company. This can provide a significant advantage over issuing equity, as there is no tax benefit to issuing equity.

An Advantage of Issuing Debt Instead of Equity Is That