ENTREPRENEURIAL PLANNING
BUSINESS PLAN DEVELOPMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Which of the following statements would be an advantage of using equity finance?
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There are taxation advantages.
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Regular payments have to be made.
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There is less risk for the business owner.
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The owner does not have to sell ownership of the business.
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Explanation:
Detailed explanation-1: -1. Equity financing is more risky than debt financing because you are giving up ownership stake in your business in exchange for capital. 2. Equity financing can be expensive, since you have to give up a portion of your profits to investors.
Detailed explanation-2: -It starts with the fact that equity is riskier than debt. Because a company typically has no legal obligation to pay dividends to common shareholders, those shareholders want a certain rate of return. Debt is much less risky for the investor because the firm is legally obligated to pay it.
There is 1 question to complete.