This paper examines how choosing which financing vehicle is best for a company is very important and how equity and debt
financing are financial mechanisms by which a firm can raise financial capital. It looks at how the characteristics of each of these two groups depend on three variables: investors' claims on future cash flow, their right to participate in company decisions and their claims on company assets in
liquidation. The paper examines the benefits and
disadvantages of both. Outline Introduction Characteristics of Equity Financing Advantages of Equity Financing Disadvantages of Equity Financing Characteristics of Debt Financing Advantages of Debt Financing Disadvantages of Debt Financing Contrast Between Equity and Debt Financing The Capital Structure Decision The Irrelevance Proposition Conclusion References Appendix