Debt financing can add value to a firm because ________.

Question

Quizplus · Accepted Answer

Debt financing allows firms to deduct interest payments from their taxes, which can reduce their overall tax liability and increase their net income. This added value can make debt financing a more appealing option for some firms compared to equity financing. However, it should be noted that taking on too much debt can also increase the firm's financial risk and potentially lead to bankruptcy.

Debt Financing Can Add Value to a Firm Because ________