The correct answer is D. Equity Share Capital.
Equity share capital is the most common form of share capital and is issued by companies to raise money from investors. Equity shareholders are the owners of the company and have a claim on its assets and profits.
Equity share capital is a tax-deductible expense for companies, which means that companies can reduce their tax liability by the amount of interest they pay on their equity share capital. This can be a significant tax advantage for companies, and it can affect their capital structure decision.
For example, if a company has a choice between issuing equity share capital or debt, it may choose to issue equity share capital if it can get a higher tax deduction for the interest it pays on the equity share capital.
The other options are not tax-deductible expenses for companies, and they do not affect their capital structure decision.
- Reserves and surplus are accumulated profits that a company has not distributed to shareholders.
- Long-term debt is money that a company borrows from lenders and repays over a long period of time.
- Preference share capital is a type of share capital that has a fixed dividend rate and a priority claim on the company’s assets in the event of liquidation.