From the standpoint of the issuing company , a disadvantage of using bonds as a means of long-term financing is that
interest must be paid on a periodic basis regardless of earnings . the bondholders do not have voting rights .
income to stockholders may increase as a result of trading on the equity .
bond interest is deductible for tax purposes . 11-Multiple Choice Question 194 The times interest earned ratio is computed by dividing income before interest expense by interest expense . net income by interest expense . income before income taxes and interest expense by interest expense . income before income taxes by interest expense . 12- Multiple Choice Question 152
If the market interest rate is greater than the contractual interest rate , bonds will sell
at a discount . only after the stated interest rate is increased . at face value . at a premium . 13- Multiple Choice Question 158 The market interest rate is often called the