Which of the following statements about equity and debt financing is correct?
A)Equity financing is always better than debt financing.
B)Equity financing requires dividends to be paid.
C)Dividends are tax deductible.
D)Equity financing can change stockholder control.

Question

Quizplus · Accepted Answer

Debt does not change stockholder control.In contrast,a stock issue gives new stockholders the right to vote and share in the earnings,diluting existing stockholders' control.The decision to pursue additional equity or debt financing depends on the circumstances.Equity does not have to be repaid;dividends are optional.Interest on debt is tax deductible.Dividends on stock are not tax deductible.

Which of the Following Statements About Equity and Debt Financing