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How Does Debt Financing Differ from Equity Financing

Question 41

Multiple Choice

How does debt financing differ from equity financing?


A) Debt financing occurs when entrepreneurs borrow from a bank,family members,friends,or financial institution money that must be paid back at some future date,while equity financing involves allocation of funds over a period of time to finance future business ventures.
B) Debt financing occurs when entrepreneurs borrow money from a bank,family members,friends,or a financial institution,while equity financing occurs when investors in a new venture receive shares in return for their infusion of cash and become part owners of the organization.
C) Debt financing occurs when investors in a new venture receive shares in return for their infusion of cash and become part owners of the organization,while equity financing involves obtaining cash from investors separately for each business deal.
D) Debt financing occurs when funds are allotted over a period of time to finance future business ventures,while equity financing occurs when entrepreneurs borrow from a bank,family members,friends,or financial institution money that must be paid back at some future date.

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