ABSTRACT
Chapter 8 looked at the risk of financial instruments from the point of view of the investor, and stated that debt was relatively low risk, and equity high risk. For the company, of course, the risk relationship is reversed. Borrowing is a high risk activity for companies, as they have to find the resources to make interest payments and repay the principal. Equity is low risk finance for a company as it is permanent, the shareholders having no contractual right to payments from the company.
