Final answer:
Debt involves borrowing money to be repaid with interest, maintaining company control, while equity means selling company shares, sharing control and profits with shareholders. The choice between debt and equity funding for business expansion depends on several factors such as control preference, repayment ability, and profit-sharing willingness.
Step-by-step explanation:
The distinguishing features of debt compared to equity primarily lie in ownership and financial obligations. Debt does not alter company ownership, as it is a loan to be repaid with interest, whereas equity involves selling company shares and hence relinquishing some control to shareholders. When seeking to raise cash to expand, choosing between debt and equity funding requires careful consideration of factors like the desire to maintain control, the ability to repay debt, and the willingness to share profits.
If I had to expand my business, my preference for debt or equity would depend on financial health and strategic goals. For a business with strong cash flow, debt financing could be advantageous as it allows the business to maintain control and adds tax benefits. However, if maintaining control is not a primary concern, or the business cannot handle regular interest payments, equity financing might be more beneficial, since it does not require repayment if the business does not profit and also spreads the risk among more stakeholders.