BUSINESS ADMINISTRATION
FINANCIAL MANAGEMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Cheapest source of finance
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Equity
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Debt
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Explanation:
Detailed explanation-1: -Retained earning is the cheapest source of finance.
Detailed explanation-2: -The Cost of Equity is generally higher than the Cost of Debt since equity investors take on more risk when purchasing a company’s stock as opposed to a company’s bond.
Detailed explanation-3: -A debenture is cheaper because they carry an option to be converted into equity shares. This means that the company can repay back the debenture holder with ordinary shares.
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