A choice between debt finance and equity finance will result in a trade-off between risk and return.

Question

Quizplus · Accepted Answer

Debt finance typically involves borrowing money with a set interest rate that must be paid back, while equity finance involves selling ownership or shares in a company. Debt finance is generally considered less risky because there is a predetermined amount of money to be paid back, but the return is also lower. Equity finance can provide a higher return, but there is more risk involved because the returns are based on the success of the company. Therefore, there is a trade-off between risk and return when choosing between debt finance and equity finance.

A Choice Between Debt Finance and Equity Finance Will Result