Bonds often are a superior method of ﬁnancing in comparison with sale and issuance of capital shares because of both the (a) leverage effects and (b) tax deductibility of interest payments.

Question

Quizplus · Accepted Answer

Bonds allow companies to take advantage of leverage, which can increase returns for investors, and interest payments are tax deductible for the company, making it a more attractive option for financing.

Bonds Often Are a Superior Method of ﬁNancing in Comparison