Equity vs Debt Video Lecture | Stocks, Bonds, Equity and Valuation : Complete Knowledge - Entrepreneurship

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FAQs on Equity vs Debt Video Lecture - Stocks, Bonds, Equity and Valuation : Complete Knowledge - Entrepreneurship

1. What is the difference between equity and debt in entrepreneurship?
Ans. In entrepreneurship, equity refers to the ownership interest in a company, which is represented by shares or stock. On the other hand, debt refers to borrowed funds that need to be repaid with interest. The main difference is that equity represents ownership, while debt represents a liability that needs to be paid back.
2. How does equity financing work for entrepreneurs?
Ans. Equity financing for entrepreneurs involves selling a portion of the ownership of their company to investors in exchange for funds. This can be done through various means such as venture capital firms, angel investors, or crowdfunding platforms. The investors become shareholders and share in the profits and losses of the business.
3. What are the advantages of equity financing for entrepreneurs?
Ans. Equity financing can provide several advantages for entrepreneurs. Firstly, it allows them to raise capital without incurring debt or having to make fixed repayments. Additionally, equity investors often bring valuable expertise and networks to the business. Furthermore, if the business succeeds, the entrepreneur can benefit from the increased value of their ownership stake.
4. What are the disadvantages of equity financing for entrepreneurs?
Ans. While equity financing has its benefits, there are also some drawbacks. Firstly, entrepreneurs may have to give up a portion of their ownership and control of the business to investors. This can lead to conflicts and loss of decision-making power. Additionally, equity financing can be more expensive in the long run as investors expect a return on their investment through dividends or capital appreciation.
5. How does debt financing work for entrepreneurs?
Ans. Debt financing for entrepreneurs involves borrowing funds from lenders such as banks or financial institutions. The borrowed amount needs to be repaid over a specified period, usually with interest. Entrepreneurs may need to provide collateral or personal guarantees to secure the loan. The interest rate and terms of repayment depend on factors such as creditworthiness and the business's financial health.
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