A disadvantage of using bonds as a method of long-term financing is that:
A) interest must be paid regardless of earnings.
B) interest expense is tax deductible.
C) bond holders do not have voting rights.
D) issuing bonds results in higher earnings per share.

Question

Quizplus · Accepted Answer

One of the main disadvantages of using bonds for long-term financing is that the interest must be paid to bondholders regardless of the company's earnings. This can put a strain on the company's cash flow, especially if the company is not generating enough revenue to cover the interest payments.

A Disadvantage of Using Bonds as a Method of Long-Term