MANAGEMENT

Detailed explanation-1: -Debt financing requires the entrepreneur to repay the amount borrowed plus interest. Long-term debt financing is normally used to provide working capital to finance inventory, accounts receivable, and operation of the business.

Detailed explanation-2: -Equity financing is money paid to your business by an outside entity. The funds come from an investor, not a lender. With equity financing, you do not have to make repayments or pay interest. Instead of paying back a loan, you share your profits with the investor.

Detailed explanation-3: -Equity financing requires no repayment, because you give up a portion of your company to the investor in exchange for the capital. Some experts argue that, despite debt financing requiring you to repay loans and interest, equity financing may cost your company more money in the long run.

Detailed explanation-4: -Equity financing is the process of raising capital through the sale of shares. Companies raise money because they might have a short-term need to pay bills or need funds for a long-term project that promotes growth. By selling shares, a business effectively sells ownership in its company in return for cash.

Detailed explanation-5: -Borrowed funds are referred to as the funds that a business needs to borrow from outside the company in order to provide a source of capital for the business. These funds are different from the capital owned by the company which are called equity funds.