Question

difference between equity and debt

Answer 1

Debt is a right to receive a fixed set of future payments. Equity is a right to receive a share in a venture's earnings. Debtholders have no protections, except for those that they contract for. Equityholders of a company are owed fiduciary duties by the management. Debtholders are usually paid before equityholders in any liquidation of the company.

Answer 2

Equity financing often means issuing additional shares of common stock to an investor. With more shares of common stock issued and outstanding, the previous stockholders' percentage of ownership decreases. Debt financing means borrowing money and not giving up ownership.