Which of the following is a major difference between debt financing and equity financing?
◦ Equity financing has a specific maturity period, whereas debt financing usually has no specific maturity period.
◦ Repayment of debt financing is not linked to organizational performance, unlike equity financing.
◦ Equity holders have primary claims on assets unlike debt financiers.
◦ Payments to equity holders reduce taxable income, whereas debt payments are not tax deductible.
◦ Debt financing is used to cover long-term expenses, whereas equity financing is used for current expenses.