Debt financing is considered riskier than equity financing because of its required payments of interest and principal.

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Debt financing requires regular payments of interest and principal, which represent additional financial obligations and can be more difficult to meet if a company experiences financial difficulties. This makes it riskier than equity financing, which doesn't typically require regular payments but instead represents an ownership stake in the company.

Debt Financing Is Considered Riskier Than Equity Financing Because of Its