Debt Vs. Equity

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Miranda Bishop Accounting II Mrs. Morgan Debt vs. Equity There are two types of financing choices a company can choose from in order to expand a company. The first is Debt Financing. Debt Financing is when a company borrows money from an outside source, like a bank, with the promise of paying back the borrowed amount, plus the agreed-upon interest, at a later date. An example would be a company taking out a secured loan from a bank. These types of loans are paid back in monthly installments and held with collateral from the company. Inventory, account receivable, equipment, real estate and insurance policies are types of collateral the bank can seize, if the company cannot pay back the loan. This can be a disadvantage if the company does

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