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    Question

    Which of the following is true?

    A In equity financing, the money has to be repaid Correct Answer Incorrect Answer
    B In debt financing, the lender gets shareholding Correct Answer Incorrect Answer
    C Equity financing is accompanied by transfer of shares Correct Answer Incorrect Answer
    D Preferential Issue is made only to Qualified Institutional Buyers Correct Answer Incorrect Answer
    E All are true Correct Answer Incorrect Answer

    Solution

    To raise capital for business needs, companies primarily have two types of financing as an option: equity financing and debt financing. Most companies use a combination of debt and equity financing, but there are some distinct advantages to both. Principal among them is that equity financing carries no repayment obligation and provides extra working capital that can be used to grow a business. Debt financing on the other hand does not require giving up a portion of ownership.

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