Asked by Assata Dockins on Jun 30, 2024
Verified
Compare and contrast debt and equity financing.
Debt Financing
A method of raising capital through the borrowing of money, typically involving the issuance of bonds or taking out loans.
Equity Financing
The act of raising capital through the sale of shares in a company, providing investors with part ownership.
- Differentiate the financing alternatives of debt and equity available to proprietors of small businesses.
Verified Answer
ZK
Zybrea KnightJul 07, 2024
Final Answer :
Equity
supplied by investors in exchange for an ownership position
need not be repaid
share in the profits
allows others a voice in management
Debt
borrowed from a creditor
must be repaid
creates leverage that can allow for returns to be magnified
creates risk of becoming insolvent
can lead to bankruptcy
supplied by investors in exchange for an ownership position
need not be repaid
share in the profits
allows others a voice in management
Debt
borrowed from a creditor
must be repaid
creates leverage that can allow for returns to be magnified
creates risk of becoming insolvent
can lead to bankruptcy
Learning Objectives
- Differentiate the financing alternatives of debt and equity available to proprietors of small businesses.
Related questions
Describe Three Sources of Debt Financing for a Small Business ...
Two Types of Funds Are Available to the Small Business ...
In Scenario 9-1, the Primary Disadvantages of Using Debt Financing ...
In Scenario 9-1, Jim Has Two Basic Choices When Looking ...
Walter Sold a Piece of Land He Inherited from His ...