Which of the following is a reason why equity capital is considered riskier than debt capital?
A) Equity capital has a higher priority claim against assets and earnings.
B) Equity capital requires regular periodic payments in the form of dividends.
C) Equity capital expects dividend payments which are not tax-deductible.
D) Equity capital remains invested in a firm indefinitely.

Question

Quizplus · Accepted Answer

Equity capital does not have a fixed maturity date like debt capital and therefore remains invested in a firm indefinitely. This makes it riskier than debt capital, which has a fixed repayment schedule and is usually secured by specific assets.

Which of the Following Is a Reason Why Equity Capital