Page 18 - Microsoft Word - 00 CIMA F1 Prelims STUDENT 2018.docx
P. 18
Chapter 1
Debt vs equity finance
Advantages
Disadvantages
Debt Equity
High default risk – interest and capital No default risk for ordinary shares.
Minimum servicing of finance per year Dividends are discretionary
required – interest
Cheap form of finance Can be expensive in periods of strong
performance
Can be easily accessible Uptake depends on market conditions
and shareholder appetite. Share issues
can fail to raise the desired amounts.
10
