Venture Capital
A key factor in attracting venture capital is having this
A Strong Team
Debt financing requires this type of payment.
Interest Payments
Equity financing involves selling this
Ownership (stock/shares)
Debt requires repayment, but equity does NOT require this.
Maturity date / repayment
Leverage means borrowing money to increase this.
Rate of return
Avoid doing this when contacting investors repeatedly.
Spamming
Debt financing has this fixed repayment deadline.
Maturity date
Common stockholders typically have this right.
Voting Rights
Dividends are paid from this type of income.
After-tax income
Leverage increases this type of risk.
Financial risk
Understanding this helps entrepreneurs identify opportunities and risks
The Market
Interest in debt financing is this for tax purposes.
Tax-deductible
Equity financing does NOT require this.
Repayment of principal
Which financing type gives ownership rights?
Equity
Cost of capital is the return required by these groups.
Lenders and investors
Walmart uses more **debt financing** instead of issuing more stock. After this change, Walmart’s **return on equity (ROE)** increases from **14% to 16%*
What is MOST likely happening?
A. Walmart is losing money due to higher debt
B. Walmart is using **leverage** to increase returns to shareholders
C. Walmart stopped paying investors completely
D. Walmart eliminated all financial risk
B. Walmart is using leverage to increase returns to shareholders