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Debt and equity capital differ

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How do debt and equity capital differ. What are the key differences between them with respect to ownership rights, claims to income and assets, maturity.

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The solution examines how debt and equity capital differ. The key differences between them with respect to ownership rights, claim to income and assets are determined.

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How do debt and equity capital differ. What are the key differences between them with respect to ownership rights, claims to income and assets, maturity?

The Company can raise the capital either by way of equity or debt. Equity is raised in the form of shares. Debt is raised in the form of debentures or bonds. The holders of the equity shares are the owners of the company. On the other hand, the holders of debentures are creditors of the company which means the company has borrowed money from the debenture holders at a specified rate of interest with a promise to repay the same after the specified period of time (say three years or five years) from the date of acceptance of bond.

Differences:

Claims to income:
The holders of the ...

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