Which of the following is NOT a reason why debt capital is considered to be the least risky source of capital?
A) It has a high priority claim against assets and earnings.
B) It has a strong legal position.
C) It is a low cost source of capital because interest payments are tax deductible.
D) It does not normally have to be repaid at a specific future date.

Question

Quizplus · Accepted Answer

Debt capital does have to be repaid at a specific future date, typically with interest. This is actually one reason why it is considered less risky than equity financing, where investors do not have a guaranteed return on their investment.

Which of the Following Is NOT a Reason Why Debt