Lesson 8.2: Debt and Equity Finance (Video)

What does the term 'equity' refer to in a business context?

• The credit score of a company

• The interest rate charged on loans

• Ownership or shares in a company

• The total debts of a company

Which of the following is a benefit of debt financing?

• Dilutes ownership of the company

• No need to repay the borrowed amount

• Tax deductions on interest payments

• Increases company's operational costs

What is a major risk associated with debt financing?

• Reduction in the interest rates

• Obligation to repay borrowed funds even in low profit scenarios

• Increased voting rights for shareholders

• Improved credit score

What does 'dilution' mean in the context of equity financing?

• Decrease in the amount of interest paid

• Reduction in company's debts

• Increase in the company's profitability

• Decrease in the value of shares due to more shares being issued

What does the repayment term 'EOM' stand for?

• Every Other Month

• Equity on Margin

• Equity on Money

• End of Month