Which of the following is an advantage for a firm to issue common stock over long-term debt?
A) the cost of equity financing being less than the cost of debt financing
B) the primary claim of equityholders on income and assets in the event of liquidation
C) no maturity date on which the par value of the issue must be repaid
D) the tax deductibility of dividends which lowers the cost of equity financing

Question

Quizplus · Accepted Answer

Unlike long-term debt, common stock does not have a maturity date, so there is no pressure on the company to repay the par value by a certain date. This can provide more flexibility for the company's financial planning and management. Options A, B, and D are not advantages of issuing common stock over long-term debt.

Which of the Following Is an Advantage for a Firm