Bonds are a popular source of financing because
A)bond interest expense is deductible for tax purposes,while dividends paid on stock are not.
B)financial analysts tend to downgrade a company that has raised large amounts of cash by frequent issues of stock.
C)a company having cash flow problems can postpone payment of interest to bondholders.
D)the bondholders can always convert their bonds into stock if they choose.

Question

Quizplus · Accepted Answer

Bond interest expense is deductible for tax purposes, while dividends paid on stock are not. This means that companies can save money on taxes by using bonds for financing instead of issuing more stock.

Bonds Are a Popular Source of Financing Because