Economics Today and Tomorrow, Student Edition
Economics Today and Tomorrow, Student Edition
1st Edition
ISBN: 9780078747663
Author: McGraw-Hill
Publisher: Glencoe/McGraw-Hill School Pub Co
Question
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Chapter 10, Problem 14AA
To determine

To analyze: The reasons why business is reluctant to take loan.

Expert Solution & Answer
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Answer to Problem 14AA

The main reason for debt financing is the obligation to pay interest to the lender.

Explanation of Solution

In debt financing, the ownership lies with the lender of the money. Debt financing just requires borrowings from lenders for a decided time and pay it back with interest. One of the major reasons why companies are reluctant to take a loan is due to the obligation to pay interest to the lenders at decided intervals.

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