Although debt financing is usually the cheapest component of capital,it cannot be used to excess because:

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Using too much debt financing can increase the financial risk of the firm, which may cause creditors to demand higher interest rates and increase the cost of all sources of financing. This can also lead to a higher chance of default and bankruptcy for the firm. Therefore, it is important to balance the use of debt financing with other sources of funding in order to minimize financial risk and maintain a low overall cost of capital.

Although Debt Financing Is Usually the Cheapest Component of Capital,it