Which of the following would be a reason that the stockholders of a company would issue bonds rather than stock to finance expansion?
A) Leveraged debt is always more advantageous than additional stock.
B) The value of their stock will inevitably decrease.
C) Dividends must be paid each year even if the company is not profitable.
D) Additional shares of stock might decrease earnings per share.

Question

Quizplus · Accepted Answer

Issuing additional shares of stock can dilute the ownership percentage of existing shareholders and decrease earnings per share, which might not be desirable for current stockholders. This is a common reason companies might choose to issue bonds instead, as it allows them to raise capital without affecting the existing shareholders' control or the earnings per share.

Which of the Following Would Be a Reason That the Stockholders