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What are the differences between personal and corporate attitudes toward debt and risk?

What are the differences between personal and corporate attitudes toward debt and risk?

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Answer #1

Personal attitude:
Only one person will be involved and the decision the person takes will be according to his or her risk appetite. In this case, the individual will be cautious and will take debt and risk to an extent up to which it can be managed and will not go beyond his or her risk appetite (leading to default on the debt payments).

Corporate attitude:
In corporations many people will be involved like management and shareholders. Management would want to take more debt and risk to generate higher returns, however the shareholders would be against it because if a company takes huge debt and is unable to pay off the debt then it could possibly put the investments of the shareholders at risk.

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