Why debt is the cheapest source of finance?

So as a general rule, which source is cheaper, debt or equity? ... However, debt is actually

the cheaper source of finance for a couple of reasons. Tax benefit: The firm gets an income
tax benefit on the interest component that is paid to the lender. Dividends to equity holders are
not tax deductable.

How do you figure out equity?

To calculate company equity, add the values for the total current assets and long-term assets.
Then, subtract the values of total current liabilities and long-term liabilities. An
alternative calculation of company equity is the value of share capital and retained earnings
less the value of treasury shares.

When should debt financing be used?

Advantages to Debt Financing. Maintain ownership: You become obligated to make the
agreed-upon payments on time when you borrow from the bank or another lender, but that's the
end of your obligation. You retain the right to run your business however you choose without
outside interference.