Equity and Debt Active Reasoning Research Proposal

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" (Small-business financing: Debt vs. equity) Venture capital is a better route than an initial public offering for an early stage startup such as Active Reasoning that lacks the size and stability required for becoming a public company.

By taking on equity financing, the company's executives are well aware that they will be giving away partial ownership of the business in exchange for money and that this will have a significant impact on management's ability to make certain decisions (Equity financing). Even so, management considers debt financing too risky at this point in time when it is not certain if the company will have stable cash flows to make monthly debt payments. Management fears that high interest costs during difficult financial periods could potentially lead to insolvency (Debt vs. equity -- advantages and disadvantages) and does not need the tax write off for the interest on debt since it does not expect to be profitable for several years.

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Further, the management team sees an advantage in venture capitalists who can bring in skills, contacts, and experience and can assist with strategy and decision making (Equity financing). The CEO wants to make sure that he partners with the right venture capital company, one that shares a common philosophy and vision for the company so that joint decision making will not be an issue.

Thus, as this paper has discussed, Active Reasoning can apply debt financing and equity financing where most beneficial to its needs. Working with a short time frame, the loan is best for the server. but, venture capital is the better option for a large amount of money to fund continuous operations......

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"Equity And Debt Active Reasoning" (2009, August 31) Retrieved May 20, 2025, from
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"Equity And Debt Active Reasoning", 31 August 2009, Accessed.20 May. 2025,
https://www.aceyourpaper.com/essays/equity-debt-active-reasoning-19698
   

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