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in general is the most beneficial mode of financing whereby the cost is low as compared to benefits. The company holds a stock in the market and can capitalize market by injection of more capital through continually increasing profitability. Since dividends are paid in both years

it is a good sign of growing business. The only drawback of equity financing is its slow pace in getting the funds as compared to bank loan whereby the funds are swiftly transferred after necessary formal procedures.

debt financing has more disadvantages. Above all

the bank takes charge on the company’s assets such as on company’s inventory or trade debts and pledged them as security and can hold the right to recover the amount by selling such assets. Such encumbrances can also make it possible for the bank to intervene over the operational matters of the company casting significant control over its policy matters. Moreover