Economics · Business Finance - Capital Structure
What is the primary financial advantage of choosing debt financing over equity financing for a profitable corporation?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1It reduces the financial gearing (leverage) ratio of the company
- 2It increases the absolute ownership control of existing shareholders
- 3Dividend payments are legally guaranteed to equity holders
- 4Interest payments on debt are tax-deductible expenses✓
Correct answer
Interest payments on debt are tax-deductible expenses
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