Which of the following factors favors the use of more debt in a company's financial structure?
A) High levels of taxable income
B) Low levels of taxable income
C) The business is basically risky with unpredictable cash flows.
D) Risk of bankruptcy would make customers reluctant to buy the company's products.

Question

Quizplus · Accepted Answer

High levels of taxable income favor the use of more debt in a company's financial structure because the interest payments on debt are tax-deductible, which can reduce the company's taxable income and thus its tax liability. This makes debt financing more attractive for companies with higher taxable incomes.

Which of the Following Factors Favors the Use of More