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.

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Debt financing is sometimes preferred by the corporate

Solution