In a short essay explain the differences between equity financing and debt financing, and discuss the ways international firms obtain equity financing or debt financing

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Companies obtain capital in two basic ways: by borrowing it or by selling shares of ownership in the firm. In equity financing, the firm obtains capital by selling stock, which gives shareholders a percentage of ownership in the firm and, often, a stream of dividend payments. The firm can also retain earnings–that is, reinvest profit rather than paying it out as dividends to investors. The main advantage of equity financing is the firm obtains capital without debt. Internationally, many firms obtain equity financing in the global equity market– stock exchanges worldwide where investors and firms meet to buy and sell shares of stock.

Debt financing comes from either of two sources: loans from banks and other financial intermediaries or the sale of corporate bonds to individuals or institutions. Using debt financing can add value to the firm because some governments allow firms to deduct interest payments from their taxes.