Which of the following is a disadvantage of debt financing?
A) It requires firms to sell stock to new investors to acquire additional funds.
B) It requires firms to make fixed payments.
C) It does not yield any tax benefits.
D) It forgoes the opportunity to use financial leverage.

Question

Quizplus · Accepted Answer

Debt financing requires firms to make fixed payments, which can be a disadvantage if the firm's cash flow is not sufficient to cover these payments.

Which of the Following Is a Disadvantage of Debt Financing