What are the two primary forms of external business finance?

What are the two primary forms of external business finance?

• A. Debt Finance
• B. Equity Finance
• C. Debt and Equity Finance
• D. Internal Finance

Answer: (C)

External finance comes from outside the business and mainly falls into two forms: debt and equity. Debt finance means borrowing money that must be paid back with interest, such as bank loans, overdrafts, or bonds. Equity finance means selling a stake in the business to investors, bringing in funds in exchange for ownership and a share of profits (and some degree of control). Internal finance, by contrast, comes from within the business itself, like retained earnings or selling assets. Since the question asks for the two primary forms of external finance, debt and equity together best capture the main external funding options.

External finance comes from outside the business and mainly falls into two forms: debt and equity. Debt finance means borrowing money that must be paid back with interest, such as bank loans, overdrafts, or bonds. Equity finance means selling a stake in the business to investors, bringing in funds in exchange for ownership and a share of profits (and some degree of control). Internal finance, by contrast, comes from within the business itself, like retained earnings or selling assets. Since the question asks for the two primary forms of external finance, debt and equity together best capture the main external funding options.