The major real-world benefit of debt is that interest payments are:
A)made after tax considerations.
B)a tax-deductible expense.
C)always less than 10% of the firm's profit.
D)smaller than the dividend payments.

Question

Quizplus · Accepted Answer

Interest payments on debt are tax-deductible expenses, meaning that they can reduce a company's taxable income and therefore, lower its tax bill. This makes debt financing a more attractive option for companies compared to equity financing, where dividend payments are not tax-deductible.

The Major Real-World Benefit of Debt Is That Interest Payments