2019HSCShort answer

Q22 (b)

3 marks

Question

Explain ONE advantage of debt financing.

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Solution

Criteria	Marks
Provides why and/or how debt finance is an advantage	3
Provides characteristics and features of ONE advantage of debt financing	2
Recognises ONE advantage of debt financing	1

Sample answer:

Debt financing can provide advantages to a business. An advantage is that interest, fees and charges are tax deductible as they are expenses of the business. By using debt financing, the business pays less in tax, which may lead to greater profits.

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Syllabus alignment

Finance

Debt and equity financingAnalyse advantages and disadvantages of debt and equity and match the term and source of finance to its business purpose.

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