MM showed that, in the absence of taxes, debt financing is neither better nor worse than equity financing because the asset to be financed is the same.
A company can generate money for working capital or capital expenditures by selling debt instruments to retail and/or institutional investors through the debt financing process. The individuals or groups that receive the cash become creditors and are guaranteed that the loan's principle and interest will be repaid. The equity financing procedure, which involves issuing stock in a public offering, is another way to raise money in the debt markets.
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