PRC-3 · Chapter 4 · Question 49 of 65
When a firm chooses debt financing over equity financing, what is a primary tax advantage of this choice?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) Interest paid on debt is typically a tax-deductible expense
Explanation
A key advantage of debt is the 'tax shield' it provides, as interest payments are treated as expenses that reduce taxable profit.
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