Question

Debt is generally the least expensive source of capital. This is primarily due to ________. debts fixed interest payments and finite maturity the secured nature of a debt obligation the tax deductibility of dividends paid to shareholders debt being less risky than equity and interest payments being tax deductible

Answer 1

Answer: Debt being less risky than equity and interest payments being tax deductible.

Explanation: Debt securities are the securities having fixed interest rates and a fixed time period to maturity. The debt holders are not considered owners of the company but rather they are the the creditors.

Debt is considered the cheapest source of finance for a number of reasons the main of which is the interest payments on debt could be deducted as expense while computing taxable income .