Who knows if debt is cheaper than equity why do companies approach the equity markets?

Answer #1

Because they might have too much debt already? Companies might want to approact the equity markets to improve their debt:equity (i.e. gearing ratio).

Also even though debt is cheaper it is MUCH more riskier than equity, companies have fixed payments that they have to meet with debt and any security over those debt instruments could result in them losing assets etc if they do not meet the payments. Equity they get once off and only once the companies get liquidated do shareholders have to be paid.

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