Question

Which of the following statements accurately describes equity investors and debt investors in a business?

a. Equity investors are individuals or entities that provide loans to a business.
b. Debt investors become partial owners of the business in exchange for their investment.
c. Equity investors receive interest payments on their investment.
d. Debt investors typically expect a share of the company's profits.

Answer 1

Equity investors become partial owners of a business and have the potential to make profits, while debt investors provide loans and expect interest payments.

Step-by-step explanation:

Equity investors and debt investors play different roles in a business.

Equity investors, also known as shareholders, purchase shares of stock in a business and become partial owners of the company. They do not provide loans to the business, but instead, they invest their money in exchange for ownership and the potential to make profits from the company's success. For example, if you buy shares of stock in a company, you become an equity investor.

Debt investors, on the other hand, provide loans to the business in the form of bonds or other debt instruments. In return, the business is obligated to make interest payments to the debt investors. Debt investors do not become partial owners of the business. They expect to receive interest on their investment, but they do not typically share in the company's profits.

To summarize, equity investors become partial owners of the business and have the potential to make profits, while debt investors provide loans and expect interest payments.