BUISENESS MANAGEMENT
BUSINESS PLANNING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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There are taxation advantages.
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Regular payments do not 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 shares in the business.
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Detailed explanation-1: -Less burden. With equity financing, there is no loan to repay. The business doesn’t have to make a monthly loan payment which can be particularly important if the business doesn’t initially generate a profit.
Detailed explanation-2: -Equity financing may be less risky than debt financing because you don’t have a loan to repay or collateral at stake. Debt also requires regular repayments, which can hurt your company’s cash flow and its ability to grow.
Detailed explanation-3: -The most important benefit of equity financing is that the money does not need not be repaid. However, equity financing does have some drawbacks. When investors purchase stock, it is understood that they will own a small stake in the business in the future.
Detailed explanation-4: -The main advantage of equity financing is that there is no loan to repay. The main disadvantage is giving up control of the company.