Debt Versus Equity Financing Paper

Debt Versus Equity funding Paper ACC/400: Accounting for ratiocination Making June 7, 2010 The adage It takes currency to make m iodiny is take to by many individuals when contemplating how to make m singley. The adage holds true for businesses as good; businesses need to finance operations with debt and equity last to make money. The following questions ensue, what are debt and equity financial have got? and is one attribute of financial backing to a greater achievement advantageous than the other? Debt and equity financing give be examined in this paper as well as if one of the not bad(p) structures may be considered more advantageous than the other. Debt Financing Debt financing occurs when a business raises money for working big(p) or capital of the United States expenditures by borrowing money from individuals, banks, and financial institutions, and in return for lending the money, the individuals, banks, or financial institutions fit creditors and g ain vigor a promise that the principal and provoke on the debt will be repaid (Investopedia, 2010, para. 1). Hence, debt financing represents creditor claims. Debt financing pull off in the hay be short-run or long-term. short-term financing is full repayment inside one socio-economic class whereas long-term financing is repayment oer more than one year. Examples of debt financing are change bonds, bills, or notes to individual and/or institutional investors (Investopedia, 2010, para. 1). Equity Financing Equity financing is rise money by selling shares of self-will in a business. Hence, equity financing represents ownership interest (Schroeder, Clark, & Cathey, 2005, p. 343).

In exchange for investing money into the ! business, the investors receive a hang on of ownership of the business and can receive dividend payments. Examples of equity financing are selling common stock or favored stock to investors (Investor Words, 2010). Advantageous Capital Structure Although both types of capital structures have advantages, the main factor in determining which is more... If you neglect to get a full essay, order it on our website: OrderEssay.net

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