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Equity shareholders are exposed to both financial risk and business risk and hence the cost of equity takes into account both of the risks.
Are creditors/lenders exposed to both financial risk and business risk?
Hi @Oscar,
Creditors/lenders provide finance to the company (directly by cash or by providing services/products on credit). From this point they look similar to shareholders that also provide resources to the company. Thus I think they all are exposed to both financial risk and business risk.
creditors/lenders are only exposed to financial risk(the risk that their money will not be paid or be delayed)
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