Comparison between Debt Finance and Ordinary Share Capital
Differences between Debt Finance and Ordinary Share Capital as Equity Finance as
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Ordinary share capital
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Debt
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a)
b)
c)
d)
e)
f)
g)
h)
i)
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It is a permanent finance
Return paid when available
Dividends are not tax allowable
Unsecured finance
Carry voting rights
Reduces gearing ratio
No legal obligation to pay
Has a residue claim
Owners' money
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a)
b)
c)
d)
e)
f)
g)
h)
i)
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It is refundable (redeemable)
It is fixed return capital
Interest on debt is a tax allowable expense
Secured finance
No voting right
Increases gearing ratio
A legal obligation to pay
Carries a superior claim
Creditors finance.
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