Business Studies · Financial Management
Identify the true statement regarding the components of capital structure from the options below:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Debt financing is always more expensive and riskier for a firm than equity financing.
- 2The financial risk to the lender is generally lower than the risk borne by an equity shareholder.✓
- 3Interest paid on debt capital is not a tax-deductible expense.
- 4The cost of debt is higher than the cost of equity.
Correct answer
The financial risk to the lender is generally lower than the risk borne by an equity shareholder.
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