Equity is considered riskier than debt because the returns to its suppliers are non-enforceable.

Question

Quizplus · Accepted Answer

Equity represents ownership in a company and the returns to its suppliers (shareholders) are not guaranteed and depend on the performance of the company. In contrast, debt represents a contractual obligation for the issuer to pay the lender a fixed amount of interest and principal, making it less risky than equity.

Equity Is Considered Riskier Than Debt Because the Returns to Its