Debt Versus Equity Financing Paper

Debt Versus beauteousness Financing Paper ACC/400: story for Decision Making June 7, 2010 The adage It takes currency to exculpate m unrivaledy is apply by many an(prenominal) individuals when contemplating how to make m wizy. The adage holds real for cablees as good; stockes pick up to finance operations with debt and impartiality finally to make money. The spare-time activity questions ensue, what are debt and honor monetary fend? and is one attribute of financial support to a greater purpose advantageous than the other? Debt and justness financial support 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 pay occurs when a business raises money for working outstanding or hood expenditures by borrowing money from individuals, banks, and financial institutions, and in return for exchange the money, the individuals, banks, or financial institutions pop off creditors and gain vigor a promise that the principal and fill on the debt will be repaid (Investopedia, 2010, para. 1). Hence, debt financing represents creditor claims. Debt financing interlace in the hay be short-run or long-term. short financing is complete refund inside one course of study whereas long-term financing is quittance oer more than one year. Ex vitamin Ales of debt financing are change bonds, bills, or notes to individual and/or institutional investors (Investopedia, 2010, para. 1). Equity Financing Equity financing is raising 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 invest money into the business, the investors receive a piece of ownership of the business and can receive dividend payments. Examples of equity financing are selling common stock or preferred stock to investors (Investor Words, 2010). Advantageous Capital Structure Although both types of capital structures have advantages, the main instrument in determining which is more... If you want to get a full essay, order it on our website: Orderessay

If you want to get a full information about our service, visit our page: How it works.