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Yokav Yokav
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6 years ago
Since equity funding is expensive, why don't businesses rely totally on debt capital?
Textbook 
Business Essentials, Canadian Edition

Business Essentials, Canadian Edition


Edition: 8th
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6 years ago
Because that would be too risky. Long-term loans and bonds carry fixed interest rates and represent a fixed promise to pay regardless of the profitability of the company. If the company can't make its fixed payments, it may have to declare bankruptcy, but it doesn't have to pay dividends to stockholders if it is short of funds.
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