Asked by Jacob Liscinsky on May 04, 2024
Verified
Accumulated tax losses will affect the optimal level of debt for a firm.
Accumulated Tax Losses
Accumulated tax losses refer to net losses that a business can carry forward to future tax years, to offset taxable income and reduce tax liabilities.
Optimal Level
The most favorable point, amount, or degree of something for a particular situation, which maximizes efficiency or returns.
- Determine the different elements that influence the ideal debt level for a company.
Verified Answer
AR
Antonio ReynaMay 06, 2024
Final Answer :
True
Explanation :
Accumulated tax losses reduce the immediate tax benefits of debt financing since interest deductions are less valuable when a firm is not paying taxes, affecting the optimal level of debt for the firm.
Learning Objectives
- Determine the different elements that influence the ideal debt level for a company.