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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’.

Oct 10, 2015 10:26 IST
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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.
i. Secured debt
ii. Unsecured Debt
iii. Public/Private Debt
iv. Loans
v. Bonds

Whereas, Contributed capital, Gained Capital and Revenue are the basic types of Equity.

 

 

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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