Which of the following statements is true?
A)Bonds never create financial leverage
B)Interest on bonds is not tax-deductible
C)Dividends to shareholders are tax-deductible
D)Interest on bonds is tax-deductible
E)Issuing bonds will dilute shareholdings

Question

Quizplus · Accepted Answer

Interest on bonds is tax-deductible, making them a popular form of financial leverage for companies. Option A is incorrect because bonds do create financial leverage. Option B is incorrect because interest on bonds is indeed tax-deductible. Option C is incorrect because dividends to shareholders are not tax-deductible. Option E is incorrect because issuing bonds will not dilute shareholdings, instead it will increase the company's debt-to-equity ratio.

Which of the Following Statements Is True