The greater the proportion of debt financing compared with equity financing for a company the:

Question

Quizplus · Accepted Answer

The greater the proportion of debt financing compared with equity financing, the higher the level of financial risk for the company. This is because debt financing comes with the obligation to pay interest and principal repayments, which can put strain on the company's cash flow if it experiences downturns in revenue or profitability. On the other hand, equity financing does not require regular interest payments and repayment of principal, and investors bear the risk of the company's performance.

The Greater the Proportion of Debt Financing Compared with Equity