Which of the following is true about the leveraging effect

Which of the following is true about the leveraging effect? O Interest on debt is a tax deductible expense, which means that it can reduce a firms taxable income and tax obligation. Interest on debt can be deducted from pre-tax income, resulting in a greater taxable income and a smaller available operating income. The U.S. tax structure influences a firms willingness to finance with debt. The tax structure debt. more discourages encourages

Answer

The answer is Interest on debt is tax deductible expense which means that it can reduce firm’s taxable income and tax obligation.

The tax structure encourage more debt.

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