Which of the following financing methods usually carries the highest cost?

The method of financing that typically carries the highest cost is equity financing. This is primarily due to the nature of equity investment, where investors are seeking a return on their investment through dividends and capital appreciation. Equity investors take on more risk than debt investors, as they are not guaranteed a return and will only receive returns after all debts are repaid.

As a result, companies often need to provide a higher rate of return to attract equity investors compared to the costs associated with borrowing money. In addition, issuing new equity can dilute existing ownership, which may also contribute to the higher overall cost of capital for a company.

In contrast, other financing methods such as short-term finance or debt financing generally incur lower costs relative to equity because they often involve fixed interest payments and do not convey ownership in the same way equity does. Long-term finance, while possibly more expensive than short-term finance, still tends to be less costly than equity financing due to the fixed repayment terms.