Which of the following is not a reason for the issuance of long-term liabilities?
A)Debt financing offers an income tax advantage.
B)Ownership interest is diluted.
C)Debt may be the only available source of funds.
D)Debt financing may have a lower cost.

Question

Quizplus · Accepted Answer

Long-term liabilities are typically issued to raise funds for a business's operations or expansion. A is correct because the interest paid on debt is tax-deductible, making it a more attractive option for financing than issuing equity. C is correct because in some cases, debt may be the only viable option for businesses with limited access to equity or other sources of funding. D is correct because debt financing may be less expensive than equity financing due to a lower cost of capital. However, ownership interest is not a reason for issuing long-term liabilities, as this refers to equity and not debt.

Which of the Following Is Not a Reason for the Issuance