Difference between cost of equity and cost of debt

With capital, it is possible to make investments, carry out marketing and research, and clear any outstanding debt. The two primary forms of capital that are inherent to a company's running are equity and debt. While both have many merits, they also come with a cost. In this article, learn the differences between the two.

Capital enables businesses to operate with efficiency and success. It generally refers to the money a business requires (and uses) to carry out its daily operations. This holds true for both large and small businesses. With capital, it is possible to make investments, carry out marketing and research, and clear any outstanding debt.  The two primary forms of capital that are inherent to a company’s running are equity and debt. They both provide the funding that is essential to the upkeep of a business, but there are some key differences between the cost of debt capital and the cost of equity. While both forms of financing have many merits, they also come with a cost.  Understanding the cost of debt  Cost of debt refers to the funds that are meant to be repaid at a l...

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