Which of the following is an advantage of debt financing?
A) The requirement to make fixed payments
B) Restrictive covenants on borrowings
C) Higher risk than equity financing
D) Taxdeductible interest payments

Question

Which of the following is an advantage of debt financing?
A) The requirement to make fixed payments
B) Restrictive covenants on borrowings
C) Higher risk than equity financing
D) Tax­deductible interest payments

Quizplus · Accepted Answer

Debt financing allows a company to deduct the interest paid on loans from their taxes, reducing their overall tax liability. This can be a significant advantage to companies, especially those with large amounts of debt.

Which of the Following Is an Advantage of Debt Financing