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Citing three reasons, justify why a firm may prefer to raise finance through equity rather than debt finance.

      

Citing three reasons, justify why a firm may prefer to raise finance through equity rather than debt finance.

  

Answers


Francis
A firm may prefer to raise finance through equity rather than debt finance due to reasons such as;
(i) less risky compared to debt. This is because you don’t have fixed monthly repayments as in the case of debt.

(ii) For startup business – who may not be given debt finances easily as they are deemed risky

(iii) When a firm as credit problems, equity finance is the best option

(iv) when a business wants to minimize on cash outflows. This is because no mandatory cash outflows are required for equity compared to debt where interest must be paid.
francis1897 answered the question on November 1, 2022 at 12:44


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