Why is balance important between different financing decisions (e.g. stock issuance versus debt issuance)
It is very important to strike a balance between financial decisions . In the case of stock issuance vs debt issuance debt issuance is a fixed cost to the firm and the investor is not taking any risk on the business. The issuer is benefitted by declining interest rate and the lender is benefitted by increasing interest rates. In the case of stock issuance the lender is directly taking equity risk in the firm and the benefit to lender is in the form of capital appreciation and dividends paid out. This does not cause any fixed cost to the firm that borrows money. So depending on the situation the right call has to be taken.