What is the major drawback of debt financing? Select one: You have to pay back the money Increasing debt changes the gearing ratio of the firm Interest payments must be made before shareholder dividends and irrespective of fluctuations in profits Lenders often require security of the loan against assets of the company

Financial Reporting, Financial Statement Analysis and Valuation
8th Edition
ISBN:9781285190907
Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw
Chapter13: Valuation: Earnings-based Approach
Section: Chapter Questions
Problem 8QE
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5.What is the major drawback of debt financing?

Select one:

You have to pay back the money


Increasing debt changes the gearing ratio of the firm


Interest payments must be made before shareholder dividends and irrespective of fluctuations in profits


Lenders often require security of the loan against assets of the company

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