Question

Why is cheaper debt not automatically the best source of finance?

विकल्प

• Debt never creates fixed payment commitments

• Borrowed funds do not create repayment obligations

• Equity requires compulsory dividends

• Cost must be balanced against risk and other factors

Answer 1

Debt may be cheaper, but its compulsory interest and repayment commitments increase risk. A financing choice must balance cost against risk and other factors.