Question

Which of the following is a benefit of selling stock to raise money versus debt?

		Bond interest is tax-deductible.
		Bond owners have no voting rights.
		Dividends can be paid whenever a company decides
		Dividends must be paid every year.

Answer 1

Answer:

Option C: Dividends can be paid whenever a company decides

Explanation;

Generally, the company has two options to get funds from the public:

• Through stocks, or
• Through debt.

The benefit of raising money through stock is that the dividends have to be paid on stocks when the company decides.

In debt, the interest has to be paid whether the company makes profits or incurs losses.

Note:

Dividends may not be paid every year. Bond interest is tax-deductible and bond owners have no voting rights. But this is not a benefit of raising money through stocks.

Hence,

Option 'C' is correct and rest all are incorrect.

In case of any doubt, please feel free to comment.