The primary disadvantage of equity capital is that the entrepreneur ________.
A)must repay it at some point with interest
B)must give up some (perhaps most)of the ownership in the business to outsiders
C)experiences the disadvantage of the risk/return tradeoff in the form of higher interest rates
D)B and C above

Question

Quizplus · Accepted Answer

Giving up ownership in the business to outsiders can be a significant disadvantage of equity capital, as it means that the entrepreneur will have less control over the decision-making process and potentially less of a share in the profits. Option A is incorrect, as equity capital does not need to be repaid with interest. Option C is also incorrect, as the risk/return tradeoff is not directly related to equity capital. Option D includes both the correct answer and an incorrect statement.

The Primary Disadvantage of Equity Capital Is That the Entrepreneur