From the company's perspective, which of the following is a disadvantage of debt as a source of finance: Companies with good credit worthiness could raise borrowings at a cheape Lenders may require the debt to be secured with covenants and assets. __ The interest payable on debt is tax-deductible. When the company raises capital through debt, it does not have to give up ownership rights or dilute its shares.

Question

From the company's perspective, which of the following is a disadvantage of debt as a source of finance: Companies with good credit worthiness could raise borrowings at a cheape Lenders may require the debt to be secured with covenants and assets. __ The interest payable on debt is tax-deductible. When the company raises capital through debt, it does not have to give up ownership rights or dilute its shares.

Answer 1

The disadvantage of debt from a company's viewpoint among those listed is Lenders may require the debt to be secured with covenants and assets. The obligation to provide security or other contractual terms (covenants) to back up the debt can restrict the company’s financial flexibility and can lead to substantial harm if the company defaults on its debt commitments.

Answer 2

## Step1: Analyze the given statement optionsWe need to find the disadvantage of debt from a company's perspective.- Companies with good credit worthiness could raise borrowings at cheaper rates.- Lenders may require the debt to be secured with covenants and assets.- The interest payable on debt is tax-deductible.- When the company raises capital through debt, it does not have to give up ownership rights or dilute its shares.

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