Debt vs. Equity Financing Quiz

equity financing is less expensive since equity uses their own funds and they do not pay interest

Equity financing also has costs that may be more expensive than the cost of debt. Why? Because there is guaranty on the returns. Even if the cost of equity is more expensive, companies still utilize equity due to its benefits such as no maturity, and other advantages which will be further discussed.

borrowing money from lenders and not giving up ownership.

the method of raising capital by selling company stock to investors (stockholders) in exchange of ownership interests in the company.

____ refers to the extension of payment due date by suppliers. The effects of stretching payables and show the computation for interest effects of not taking discounts.

_______personal funds advanced by a stockholder to a company that usually requires interest. These usually require little to no interest on advances, especially if the owner is advancing funds to assist the company in sudden liquidity crisis. This source, however, is depended on the availability of funds of an individual.

provided lending services to its members. Members usually pay contributions to the cooperative.

provides several loan products catering to different types of needs.

just take note of the high interest rates on this source of funds.

_____companies that are dedicated to lending. They usually charge higher interest than banks but their credit requirements are more lenient compared to banks.