The Difference Between Debt & Equity
- Debt is a liability; it represents what firms owe
- Individuals or businesses that lend money to a firm are called creditors
- E.g. Banks loans, corporate bonds, and mortgages
- Equity represents all physical and financial assets owned by firm
- Firms can raise finance by issuing shares or corporate bonds
- Firms can use both debt and equity as a source of finance for their operations
The Difference Between Debt and Equity as a Source of Finance
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Ownership rights
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Risk and return
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Voting rights
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