Which of the following statements is true?
A) Interest on bonds is not tax deductible.
B) Dividends to stockholders are tax deductible.
C) Interest on bonds is tax deductible.
D) Bonds do not have to be repaid.
E) Bonds always increase return on equity.

Question

Quizplus · Accepted Answer

Interest on bonds is tax deductible, which is a benefit for the company issuing the bonds. This is because interest payments are considered a business expense and can be deducted from the company's taxable income, thereby reducing its tax liability. Option A is incorrect because interest on bonds is tax deductible. Option B is incorrect because dividends to stockholders are not tax deductible. Option D is incorrect because bonds are a form of debt and must be repaid by the borrower. Option E is incorrect because the impact of bonds on return on equity depends on the specific situation and is not a universal truth.

Which of the Following Statements Is True