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Characteristics of Debt Finance
1. It is a fixed return finance: interest on debt is fixed regarding less of the profits made by the company.
2. Interest of debt finance is a legal obligation on the part of company to pay and failure to pay it may lead the company into receivership in the extreme.
3. It is usually given on conditions and restrictions except for overdrafts.
4. It carries a first claim on profits and assets before other finances.
5. It does not carry voting rights and as such it does not participate in the decision making process of the company.
6. Its use rises the company’s gearing level.
7. It is always refundable except for irredeemable debentures.
8. it is usually a secured type of finance
9. Interest on debt finance is a tax-allowable expense.
lydiajane74 answered the question on May 9, 2018 at 19:41
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