In the context of the capital structure of a firm, which of the following statements is true of equity financing?
A) It is less flexible than debt financing.
B) It is less risky than debt financing.
C) It requires firms to agree to burdensome covenants.
D) It yields the same tax benefits as debt financing.

Question

Quizplus · Accepted Answer

Equity financing is generally considered less risky than debt financing because it does not require fixed payments and does not increase the firm's financial leverage.

In the Context of the Capital Structure of a Firm