Discussing Debt and Equity
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What are the advantages and disadvantages of funding a company with debt or equity? Please explain.
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Solution Summary
This solution of 293 words explains the advantages and disadvantages of using debt or equity in funding a company with examples.
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Debt:
The primary advantage of raising capital with debt is the retention of control. Although lenders will charge interest on the money, they will have little to no control over the operations and strategy of the business. Another advantage of debt is the known regularity of payments and the expectations of lenders. Debt is simplistic and predictable.
The disadvantages of debt include the fact that it can be expensive, especially for firms ...
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