Equity Vs. Debt Financing

Choosing between equity and debt is one of the most common decision made by business managers while raising capital.  These are the two main sources of capital for any business.

Equity is the form of capital raised from investors in change for a share in ownership of the business. Equity refers to a stock or an other security representing ownership in the business.

On the other hand, debt is the loans taken by the business from banks which must be repaid along with interest. The debt can be long-term or short-term depending on he needs of the business.

This simple video from Khan Academy explains the differences between equity and debt.