Make a comparison between equity and debt?
Money can be raised via Debt or equity.Equity refers to the stocks or an ownership stake in a company.Equity holder in a company is also known as ‘Shareholders’.
| Debt |
Equity |
| a. It refers to the amount of money, property or service which belongs to someone else. | It refers to the value of assets after excluding all debts and liabilities. |
| b. There are following types of Debt. |
Whereas, Contributed capital, Gained Capital and Revenue are the basic types of Equity.
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| c. It is calculated as, Debt=Amount Owned- Value of assets |
Whereas, Equity=Value of assets- Amount Owned |
| d. It is used for purchasing assets that are more valuable than the party’s ability to purchase them.It can be used for Equity trading or other benefits Of the companies. | It is used in the estimation of potential gain in any asset transaction for purchasing power. It also can be used for Debt and other benefits of the companies. |
| e. For Example: - Balance in credit card.Whenever, user owed money from the bank.Then, he is bound to pay it under a fixed duration of time. If he is not able to do so,then credit card company will charge interest on the withdrawal money. | The value of Home after paying off all mortgages in full.
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