Question

Debt financing is sometimes preferred by the corporate

Q: Answer-Debt financing is sometimes preferred by the corporate due to the fact that:

Interest on debt is considered a business expense and is tax-deductible under the Income Tax Act in most jurisdictions, including many countries that follow the principles of taxation. This means that the interest paid on debt reduces the taxable income of the company, resulting in lower tax liability. By utilizing debt financing, companies can benefit from the tax deductibility of interest expenses, which can lead to potential tax savings and improve the companys overall financial position.

due to the fact that:

A interest on debt is an allowable deduction under Income Tax Act.

B working on high debt is relatively less riskier as compared to equity shares.

C normally, debt financing can easily be availed during start-up phase of a company.

D usually handling the debtors is easier than the shareholders during losses.

Practice Next

More Accounts Questions

Which festival is celebrated on the day of the closing ceremony of Kedarnath Dham?
Which organization was established in response to the December 2004 Indian Ocean tsunami?
FRONX is a car by a trusted Car Brand, it is manufactured in which of the following countries?
The liberalized uniform time limit of how many days is applicable only to resident individuals and in areas other than export of goods and services in ?
Which part of the Constitution of India consists of the idea of a Welfare State?
In which of the following events did India win the maximum number of medals in the recently held Asian Games – 2023?
What is the dimension of the kabaddi play field for men?
Who developed the C-FLOOD, the Unified Inundation Forecasting System in India?
Haripriya Namboodiri is an exponent of which Indian classical dance form?
Which manuscript of the Bhagavad Gita is included in UNESCO’s Memory of the World Register?

Debt financing is sometimes preferred by the corporate

Solution