ENTREPRENEURIAL FINANCE
DEBT FINANCING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Debt offers ownership in the company
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You have to pay back with debt equity, but not with equity
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You have to pay back with equity, but not with debt
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Equity can be acquired quickly
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Detailed explanation-1: -The primary difference between Debt and Equity Financing is that debt financing is when the company raises the capital by selling the debt instruments to the investors. In contrast, equity financing is when the company raises capital by selling its shares to the public.
Detailed explanation-2: -Debt financing involves the borrowing of money whereas equity financing involves selling a portion of equity in the company. The main advantage of equity financing is that there is no obligation to repay the money acquired through it.
Detailed explanation-3: -What’s the difference between debt financing and equity financing? Debt financing raises funds by borrowing. Equity financing raises funds from within the firm through investment of retained earnings, sale of stock to investors, or sale of part ownership to venture capitalists.
Detailed explanation-4: -It can be short-term, long-term or revolving. Debt always involves some form of repayment with interest that must be made whether the company is making a profit or not. Equity financing involves the owner giving up a share of the business. Unlike debt, equity financing doesn’t require repayment.