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Tarun Suthar
•

The Institute of Chartered Accountants of India • 1d

Equity vs. Debt - What’s Better for Business Funding? 🤔 Let’s break it down with a simple example: Both scenarios (A & B) start with the same revenue and cost structure. But there's one key difference - the funding source. Scenario A: Funded entirely through equity Scenario B: Funded with debt, incurring ₹500 interest Key Insight: Despite interest expense in B, the tax savings (₹150) make a significant impact. Result - Higher cashflow in Scenario B: ₹1050 vs. ₹900 in Scenario A. This is the power of the debt tax shield.🔥 However, while debt improves cashflow, it also increases financial risk. The optimal choice depends on your risk appetite and business stability. Moral: Leverage can work for you - if managed wisely. Note: Debt is better if ROI > Cost of Debt Would you go with equity or debt for your startup?

7 replies32 likes

Replies (7)

Tarun Suthar
•

The Institute of Chartered Accountants of India • 1d

Hi everyone, I apologise for the one incorrect data. EBT for Funds from debt will be 1500

0 replies2 likes

Thatmoonemojiguy

A guy with a lot of ... • 1d

so I if have x money needed to start a startup, take x money as loan is the best way right?🌝

2 replies1 like

Ravi Singh

Information is Every... • 1d

[This post has been deleted by the creator]

1 replies1 like

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