QUESTION 5 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.

"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."

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Federal Reserve Bank of New York Mock Interview

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

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28 The Federal Reserve Bank of New York Interview Questions & Answers