Which of the following is an advantage of a company using equity rather than debt to finance a project?
A)Dividends do not need to be paid.
B)Interest is tax deductible, whereas dividends paid are not.
C)Dividends require less cash than does paying interest on debt.
D)No taxation occurs, similar to bonds.

Question

Quizplus · Accepted Answer

Dividends are not a mandatory payment like interest on debt, giving companies more flexibility in managing their finances. Unlike debt financing, where interest payments are obligatory and can strain a company's cash flow, equity financing through issuing shares does not require regular payments. This can be particularly advantageous during periods when the company might not be generating significant profits.

Which of the Following Is an Advantage of a Company