Which term describes financing by selling ownership shares in the business?

• A. Debt Financing
• B. Equity Financing
• C. Lease
• D. Angel Investing

Answer: (B)

Equity financing is funding obtained by selling ownership shares in the company. When a business sells stock or other ownership units, investors provide capital and receive a stake in the company in return. They share in profits through dividends and stock appreciation, and they bear the risk of losses as owners. There’s no mandatory repayment like with a loan, though investors may gain rights such as a seat on the board or voting power. This distinguishes it from debt financing, which is borrowing money that must be repaid with interest. A lease is simply renting an asset and doesn’t involve selling ownership in the business. Angel investing is a specific type of equity financing from individual investors, often early-stage, but the general term for financing by selling ownership shares is equity financing.