Debt financing is riskier than equity financing, but it does provide benefits to the firm.

Question

Quizplus · Accepted Answer

Debt financing is riskier than equity financing because the firm has to make interest payments and eventually repay the principal, regardless of the profitability of the business. However, debt financing also provides benefits such as tax deductions for interest payments and the ability to leverage funds to make larger investments.

Debt Financing Is Riskier Than Equity Financing, but It Does