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JPMorgan Chase Mock Interview

Question 25 of 28 for our JPMorgan Chase Mock Interview

JPMorgan Chase was written by on April 10th, 2020. Learn more here.

Question 25 of 28

Can you think of a situation where raising debt over equity would be beneficial?

Debt and equity have a very closely bonded relationship with each other in relation to a company's finances. In most situations, raising debt can create too high of an amount of pressure to meet payments versus raising equity. But, there are a few key situations where there is a distinct advantage in raising debt over equity and your interviewer will be looking to hear that you understand at least one of those advantages to be tax shielding, reducing cost of capital and not diluting the stake for investors.

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How to Answer: Can you think of a situation where raising debt over equity would be beneficial?

Advice and answer examples written specifically for a JPMorgan Chase job interview.

  • 25. Can you think of a situation where raising debt over equity would be beneficial?

      How to Answer

      Debt and equity have a very closely bonded relationship with each other in relation to a company's finances. In most situations, raising debt can create too high of an amount of pressure to meet payments versus raising equity. But, there are a few key situations where there is a distinct advantage in raising debt over equity and your interviewer will be looking to hear that you understand at least one of those advantages to be tax shielding, reducing cost of capital and not diluting the stake for investors.

      Written by Ryan Brunner on April 10th, 2020

      1st Answer Example

      "In the situations where I've advised an organization to increase debt, they've received a distinct advantage in a lower cost form of financing versus equity financing. In the end, this reduced the organization's WACC and came out to be a win for them."

      Written by Ryan Brunner on April 10th, 2020

      2nd Answer Example

      "Last year, I advised a manufacturer to take the debt over equity route when adding a new line of products that was guaranteed to be very profitable. This fact allowed the company to simply and quickly repay the loan plus interest while being able to reap the rewards of the extra profits. In that same case using equity, final profit would've been less."