Equity vs debt capital: Here are five things to know

1. Equity capital is for perpetuity and not returned, debt capital has to be returned after a specified time.

2. Equity investors do not enjoy any fixed return, debt investors earn a pre-decided rate of interest.

3. Equity investors are owners of the business; debt investors are lenders to the business.


4. Equity investors participate in the management of the business; debt investors do not.

5. The profit/loss that the company makes belongs to the equity investors after paying off the debt.

(Content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)