Question

Advantages of debt financing over equity financing include that ______. (Check all that apply.) Multiple select question. debt financing does not require repayments interest payments are optional interest payments are tax deductible stockholders' control will not be diluted

Answer 1

Advantages of debt financing over equity financing include that interest payment on debt are tax deductible

What is debt financing?

Borrowing funds from banks, financial institutions, or other lenders (such as directors or other group companies).

When a company raises funds for working capital or capital expenditures by selling debt instruments to individuals and/or institutional investors, this is referred to as debt financing. Individuals or institutions that lend money become creditors in exchange for a promise that the principal and interest on the loan will be repaid.

What is equity financing?

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 have a long-term goal and require funds to invest in their growth. By selling shares, a company is effectively selling ownership in their company in return for cash.

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