Why Is Debt a cheaper source of finance?

1.	Why Is Debt a cheaper source of finance?
Answer» Debt finance is a cheaper source of finance because of the TWO essential points:- The company gets an income tax benefit on the INTEREST component that is paid to the lender. If the company becomes bankrupt, debt holders have the FIRST claim on their company assets (collateral) which increases their SECURITY

Answer»

Debt finance is a cheaper source of finance because of the TWO essential points:-

The company gets an income tax benefit on the INTEREST component that is paid to the lender.
If the company becomes bankrupt, debt holders have the FIRST claim on their company assets (collateral) which increases their SECURITY

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