Which of the following is a disadvantage of debt financing?
A) Dividends must be paid.
B) It requires shareholders to invest more money.
C) Fixed payments are required.
D) The tax rate is higher.

Question

Quizplus · Accepted Answer

Debt financing requires fixed payments, which can become a burden for a company if it experiences a downturn in sales or revenue. Additionally, failure to make these payments can lead to default and potentially bankruptcy. Dividends and shareholder investments are not directly related to debt financing, and the tax rate may vary depending on a company's specific situation.

Which of the Following Is a Disadvantage of Debt Financing