Debt and Equity Financing

In this chapter, we venture into the dynamics of debt and equity financing, two of the most important pillars supporting a company’s capital structure.

It is imperative for businesses, regardless of their size or industry, to balance their financing sources to maintain fiscal health and promote growth.Choosing between debt and equity financing—or determining the ideal blend—can be a pivotal decision, with profound implications for a company’s financial future.

Each method brings its own set of advantages and challenges, and understanding these is critical to making informed, strategic decisions.

Every company has to turn to financing at some point or another. Financing means that a company raises money that it did not earn. The money comes from some external source (e.g., a bank). What type of financing can a company pursue? There are two options for financing a company: debt financing and equity financing.