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What is the advantage of financing with debt compared to equity? Please explain in detail.

What is the advantage of financing with debt compared to equity? Please explain in detail.

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When financing a company, "cost" is the measurable cost of obtaining capital. With debt, this is the interest expense a company pays on its debt. With equity, the cost of capital refers to the claim on earnings provided to shareholders for their ownership stake in the business.When a firm raises money for capital by selling debt instruments to investors, it is known as debt financing. In return for lending the money, the individuals or institutions become creditors and receive a promise that the principal and interest on the debt will be repaid on a regular schedule.

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