What is the difference between debt and equity? - ProProfs Discuss
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What is the difference between debt and equity?

Asked by Dunstano, Last updated: Sep 17, 2021

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John Smith

John Smith

John Smith
John Smith

Answered Sep 08, 2016

Debt financing refers to such securities as bonds. when companies and governmentsneed to borrow money, they may issue bonds in exchange for cash. the people whobuy the bonds are lending their money and will be paid interest. bonds have a maturitydate in the future where the loan is due back to the investors who loaned their money.on the other hand, equity financing refers to stocks. there are two main types ofstocks: preferred and common. as businesses grow, the demand for funds to spurgrowth and development often grows too. when a company raises money by sellingstocks, investors are purchasing shares in ownership of the business.
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