Which of the following is an advantage of equity financing over debt financing?

A. It's possible to raise more money than a loan can usually provide.
B. The original partners can maintain total control of the company.
C. Debt financing is reserved for large corporations with a history of high profits.
D. Equity financing provides necessary capital more quickly than a loan.

Question

16-06-2024
Business

Answered

Which of the following is an advantage of equity financing over debt financing?

A. It's possible to raise more money than a loan can usually provide.
B. The original partners can maintain total control of the company.
C. Debt financing is reserved for large corporations with a history of high profits.
D. Equity financing provides necessary capital more quickly than a loan.

Answer :

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Final answer:

Equity financing allows a company to raise more money than a loan, share risks with many investors, and offers flexibility without scheduled interest payments.

Explanation:

Equity financing offers advantages over debt financing. One key advantage is that through equity financing, a company can raise more money than a loan typically provides. Additionally, equity financing allows the company to share the risks with a larger pool of investors, as opposed to being solely responsible for repayment obligations like in debt financing. Moreover, equity financing does not require scheduled interest payments, providing flexibility to the company.

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