Quiz – T/F: Interest paid by a corporation is a tax deduction for the paying corporation

Fundamentals of Financial Management, Concise

Brigham and Houston

09th Edition and 10th Edition

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Determine if the following statement is true:

Interest paid by a corporation is a tax deduction for the paying corporation. On the other hand, dividends paid are not tax deductible. This tax advantage to debt financing tends to encourage the use of debt by corporations.

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