Question

Is equity financing a short-term or a long-term financing option? How does it work?

Answer 1

Equity financing is long-term financing option as equity issue remains for the whole life of the firm until firm repurchase and retire it.

Equity can be raised by giving up the ownership of the company. Equity holders ownership depends on the number of shares they hold. The equity holders can sell their shares to others to exit the investment in the company.

Thus the equity transfers from one person to another after being issued. Hence Equity financing is long-term financing option.