Although debt financing is generally cheaper than equity financing, financial managers should not use debt financing significantly above the industry standard because it can increase the firm's overall cost of capital.

Question

Quizplus · Accepted Answer

Using too much debt financing can increase a company's financial risk and make it more difficult to obtain additional financing in the future. This can ultimately increase the company's overall cost of capital.

Although Debt Financing Is Generally Cheaper Than Equity Financing, Financial