1.

Explain why debt is usually considered the cheapest source of financing available?

Answer»

Debt financing is one of the most cheaper sources of ARRANGING funds.


One of the biggest reasons is the tax benefits you get on the interest PART PAID to your LENDER. It reduces the tax burden on the taxpayer.


Creditors cannot claim the assets of a firm which is less risky when a company is winding up.


Lender cannot ask for a share in profits which reduces the amount paid out of creditors.



Discussion

No Comment Found

Related InterviewSolutions