Answer:
The right equation to determine the NPW is:
= B) NPW = -20000 + 4000(P/A,6%,3) + 5000(P/F,6%,3)
Explanation:
a) Data:
Present value cost of production equipment = $20,000
Annual benefits = $4,000
Period of useful life = 3 years
MARR = 6%
Salvage value = $5,000
Present Value Annuity Factor for annual benefits for 3 years at 6% = 2.673
Present Value Factor for Salvage Value after 3 years at 6% = 0.840
Present Value Factor for the initial cost of investment = 1
Therefore, to obtain the NPW of the investment, the correct equation is:
B) NPW = -20000 + 4000(P/A,6%,3) + 5000(P/F,6%,3)
where NPW = Net Present Worth
P/A = Present Value Annuity Factor
P/F = Present Value Discount Factor
Use the starting balance sheet and the list of changes to create an updated balance sheet and to answer the question.
Valley Technology Balance Sheet As of December 31, 2020 (amounts in thousands)
Cash 2,200 Liabilities 3,600
Other Assets 2,800 Equity 1,400
Total Assets 5,000 Total Liabilities 5,000
Between January 1 and March 31, 2021:
1. Cash decreases by $200,000
2. Liabilities decrease by $100,000
3. Equity increases by $400,000
What is the value for Other Assets on March 31, 2021?
Answer: $3,300,000
Explanation:
Accounting formula:
Assets = Equity + Liabilities
Total equity and liabilities on March 31 is:
= Beginning balance - decrease in liabilities + Increase in Equity
= 5,000,000 - 100,000 + 400,000
= $5,300,000
Assets therefore has to be $5,300,000 on the same date.
Assets = New cash balance + Other assets
5,300,000 = (2,200,000 - 200,000) + Other assets
Other assets = 5,300,000 - 2,000,000
= $3,300,000
difference between price consumption curve and income consumption curve
Answer:
Price-consumption curve is a graph that shows how a consumer's consumption choices change when price of one of the goods changes. Income-consumption curve is a similar graph which traces changes in demand in response to changes in income.
Fruit Computer Company makes a fruit themed computer. Variable costs are $220 per unit, and fixed costs are $32,000 per month. Fruit Computer Company sells 500 units per month at a sales price of $300. The company believes that it can increase the price if the computer quality is upgraded. If so, the variable cost will increase to $240 per unit, and the fixed costs will rise by 50%. The CEO wishes to increase the company's operating income by 25%. Which sales price level would give the desired results
Answer:
Fruit Computer Company
The sales price level that would give the desired results is:
= $356 per unit
Explanation:
a) Data and Calculations:
Variable costs per unit = $220
Fixed costs per month = $32,000
Monthly sales units = 500 units
Selling price per unit = $300
Before Change After Change
Sales revenue $150,000 $178,000 ($168,000 + $10,000)
Variable costs 110,000 120,000
Fixed costs 32,000 48,000
Total costs $142,000 $168,000
Operating income $8,000 $10,000 ($8,000 * 1.25)
The sales price level that would give the desired results is $356 ($178,000/500). This represents an increase of 18.7% ($56/$300 * 100).
8794979666++++45626563.
Meyer Company reported the following for its recent year of operation:
From Income Statement:
Depreciation Expense $1,000
Loss on the Sale of Equipment (3,000)
From the comparative balance sheet:
Beginning balance, equipment $12,500
Ending balance, equipment 8,000
Beginning balance, accumulated depreciation 2,000
Ending balance, accumulated depreciation 2,600
No new equipment was purchased during the year. What was the selling price of the equipment?
Answer:
$900
Explanation:
Calculation to determine the selling price of the equipment
First step
Cost of equipment sold = Beginning balance - Ending balance
Cost of equipment sold=$12,500-$8,000
Cost of equipment sold=$4,500
Second step
Ending balance= Beginning balance + Depreciation expense - Accumulated depreciation on equipment sold
Ending balance=$2,000+$1,000-$600
Ending balance=$2,400
Third step
Book value = Cost of equipment sold - Accumulated depreciation on equipment sold
Book value=$4,500-$600
Book value=$3,900
Now let determine the selling price of the equipment
Selling price=$3,000-$3,900
Selling price=$900
Therefore the selling price of the equipment.is $900
Schell Company manufactures automobile floor mats. It currently has two product lines, the Standard and the Deluxe. Schell has a total of $25,740 in overhead. It currently uses a traditional cost system with overhead applied to the product on the basis of either labor hours or machine hours. Schell has compiled the following information about possible cost drivers and its two product lines:
Schell Company Total Quantity/Amount Consumed by Standard Floor Mat Line Quantity/Amount Consumed by Deluxe Floor Mat Line
1,170 labor hours 740 labor hours 430 labor hours
7,000 machine hours 2,900 machine hours 4,100 machine hours
Required:
a. Suppose Schell uses a traditional costing system with direct labor hours as the cost driver. Determine the amount of overhead assigned to each product line.
b. Suppose Schell uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line.
Answer:
Schell Company
Overhead assigned: Standard Deluxe
a. Based on Labor hours $16,280 $9,460
b. Based on Machine hours $10,663 $15,076
Explanation:
a) Data and Calculations:
Total overhead = $25,740
Total Standard Deluxe Overhead Rate
Labor hours 1,170 740 430 $22 ($25,740/1,170)
Machine hours 7,000 2,900 4,100 $3.677 ($25,740/7,000)
Overhead assigned: Standard Deluxe
a. Based on Labor hours $16,280 $9,460
($22 * 740) ($22 * 430)
b. Based on Machine hours $10,663 $15,076
($3.677 * 2,900) ($3.677 * 4,100)
Northberg Company is preparing a cash budget for August. The company has $16,000 cash at the beginning of August and anticipates $126,000 in cash receipts and $134,500 in cash payments during August. Northberg Company wants to maintain a minimum cash balance of $15,000. To maintain the $15,000 required balance, during August the company must: Group of answer choices Borrow $15,000. Repay $7,500. Repay $8,500. Borrow $7,500. Borrow $8,500.
Answer:
Borrow $7,500
Explanation:
The calculation of the amount that should be required to maintain the required balance is given below:
Preliminary cash balance
= Opening balance + Cash receipts - Cash disbursements
= $16,000 + $126,000 - $134,500
= $7,500
Since we have to maintain $15,000 so we have to borrow the following amount
= $15,000 - $7,500
= $7,500
Country A and Country B have had an informal trading arrangement for many years wherein merchants on the border of the countries may freely trade goods without the restriction of fees. Which of the following is true?
a. The government of Country A may not arbitrarily begin to charge fees for items brought in from Country B.
b. Country A and Country B have a binding agreement to this arrangement under customary international law.
c. Country A and Country B have no binding agreement under customary international law.
d. More than one response is correct.
Answer:
d. More than one response is correct.
Explanation:
Even though international law does not follow common law, and informal agreements are not enforceable between countries, they tend to facilitate the relationship between them. For example, Canada and the US do not have a strict border patrol and no one is asking for a wall to be built on the Canadian border. It is accepted that US and Canadian citizens cross almost freely as tourists. If someone tried to enforce a strong border policy, the other government would oppose it and it would turn into a diplomatic mess and would probably not be enforceable at all.
A lender uses these tools to help prequalify you for a mortgage
Answer:
Following are the summary of tools/documents that are used by lenders to pre-qualify their customers for a mortgage :
1. Tax returns, W-2s, and 1099s are examples of income as well as employment records.
2. Bank, pension, and brokerage accounts property declarations
3. Settlements on your obligations on a regular basis as well as any real estate debt statements.
4. Rent deposits, divorce, insolvency, and repossession records are all kept on file.
Question 4 of 10
Which situation best illustrates the process of capital formation?
O A. A farmer increases his profits by growing a variety of new crops.
B. An artist buys bonds that will increase in value over time.
C. An engineer tries to limit her spending during the week.
O D. A factory worker takes out a high-interest loan to buy a new home.
SUBMIT
Answer:
I think it is B
Explanation:
Answer:
an artist buys bondss that will increase in value over time.
Explanation:
took the test. UwU
Suppose that a small family farm sold its output for $100,000 in a given year. The family spent $25,000 on fuel; $40,000 on seed, fertilizer, and pesticides; and $25,000 on equipment, including maintenance. The family members could have earned $20,000 working at other occupations. What is the family's accounting cost? What is the family's economic cost? Could the family's economic cost ever exceed its accounting cost? Why or why not?
Answer:
Accounting Cost
Accounting costs refers to the explicit costs which ar the actual costs related to the business venture. In this case that would be:
= Fuel costs + Seed costs + Equipment
= 25,000 + 40,000 + 25,000
= $90,000
Economic cost
This includes the accounting costs and then adds the implicit costs which are the opportunity costs of choosing the current business venture. In this case it is the $20,000 they could have been making working at other occupations.
= Accounting cost + Salary foregone
= 90,000 + 20,000
= $110,000
Economic costs will always be higher than Accounting costs because they include both the accounting costs and opportunity costs.
Somerset Computer Company has been purchasing carrying cases for its portable computers at a purchase price of $62 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 45% of direct labor cost. The unit costs to produce comparable carrying cases are expected to be as follows:
Direct materials $8.00
Direct labor 12.00
Factory overhead (40% of direct labor) 4.80
Total cost per unit $24.80
If Somerset Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 25% of the direct labor costs.
Required:
Prepare a differential analysis dated April 30 to determine whether the company should make (Alternative 1) or buy (Alternative 2) the carrying case.
Answer:
Somerset Computer Company
Differential Analysis dated April 30:
Make Buy
Alternative 1 Alternative 2 Difference
Variable cost per unit $23.00 $62.00 $39.00
Explanation:
a) Data and Calculations:
Purchase price per portable computer carrying case = $62
Unit cost of production:
Direct materials $8.00
Direct labor 12.00
Factory overhead (40% of direct labor) 4.80
Total cost per unit $24.80
Unit cost of production, with overhead broken into fixed and variable:
Direct materials $8.00
Direct labor 12.00
Factory overhead
Fixed overhead 1.80
Variable overhead 3.00
Total cost per unit $24.80
b) With a net gain of $39 per unit, the company should make the unit (Alternative 1) instead of buying it (Alternative 2).
Well Water Inc. wants to produce and sell a new flavored water. In order to penetrate the market, the product will have to sell at $2.00 per 12 oz. bottle. The following data has been collected:
Annual sales......................................................50,000 bottles
Projected selling and administrative costs.....$8,000
Desired profit.....................................................$80,000
The target cost per bottle is:__________
Answer:
The answer is "0.4".
Explanation:
[tex]\\\to \text{Total Cost of Goods Sold = Sales revenue - Desired profit}[/tex]
[tex]= (2\times 50,000) - 80,000\\\\= 1,00,000 - 80,000\\\\= 20,000[/tex]
Calculating the target cost per bottle:
[tex]= \frac{\text{Total cost of goods sold}}{ \text{units sold}}\\\\= \frac{20,000}{50,000}\\\\= \frac{2}{5}\\\\= 0.4[/tex]
At the beginning of the year, your company borrows $33,600 by signing a six-year promissory note that states an annual interest rate of 9% plus principal repayments of $5,600 each year. Interest is paid at the end of the second and fourth quarters, whereas principal payments are due at the end of each year. How does this new promissory note affect the current and non-current liability amounts reported on the classified balance sheet prepared at the end of the first quarter
Answer:
Current liabilities Increase by $6356
Non-current liabilities Increase by $27,244
Explanation:
Calculation to determine How does this new promissory note affect the current and non-current liability amounts reported on the classified balance sheet prepared at the end of the first quarter
First step is calculate the Interest Payable using this formula
Interest Payable = Principal × Interest rate × Time
Let plug in the formula
Interest Payable= $33600 × 0.09 × 3/12
Interest Payable= $756
Now let determine the current and non-current liability amounts
Current liabilities = Interest payable + Current portion of long-term debt
Current liabilities= $756 + $5600
Current liabilities= $6356
Non-current liability = Amount of promissory note - Current portion of long-term debt
Non-current liability= $33600 - $6356
Non-current liability= $27,244
Therefore How does this new promissory note affect the current and non-current liability amounts reported on the classified balance sheet prepared at the end of the first quarter is:
Current liabilities Increase by $6356
Non-current liabilities Increase by $27,244
In the small country of Economerica, there are 6 thousand people employed, 1 thousand people unemployed, and 3 thousand people of working age not included in the labor force. One thousand students graduate from the university and seek jobs in the country, but not one graduate is able to find one. Half of the new graduates believe there is no chance of finding a job and return home to live with their parents. Ceteris Paribus, what would the new unemployment rate be in Economerica?
A. 14.29%
B. 20.00%
C. 25.00%
D. 45.45%
Answer: B. 20.00%
Explanation:
Unemployment rate does not include those who have given up on finding a job.
Unemployment rate = Unemployed people / Labor force
Unemployed people:
= Original unemployed + half the new graduates
= 1,000 + (1,000 / 2)
= 1,500 people
Labor force:
= Unemployed + employed people
= 1,500 + 6,000
= 7,500 people
Unemployment rate:
= 1,500 / 7,500
= 20%
As more units of an item are purchased, everything else equal, marginal satisfaction from consuming additional units will tend to Select one: a. decrease at the same rate for all consumers. b. decrease but at different rates for different people. c. increase at the same rate for all consumers. d. increase but at a decreasing rate for all consumers.
Answer:
b
Explanation:
Marginal satisfaction is the additional satisfaction received from consuming an additional unit of a good or service. It is the change in total satisfaction by increasing the quantity consumed by one unit
Marginal satisfaction usually declines as more units of the products is consumed
An example illustrating diminishing marginal satisfaction.
Imagine a traveller arriving from the desert where he hadn't had a drink of water in days .he is offered his first glass of water. the first cup of water he drinks would give him the highest utility. As more and more cups of water is drank, marginal utility decreases. At the point where he is fully satisfied, he stops drinking water and marginal utility becomes zero.
the decrease in marginal satisfaction of this traveller would be slower than the decrease in marginal satisfaction of a person working in an air conditioned office with easy assess to water
Relevant Range and Fixed and Variable Costs
Vogel Inc. manufactures memory chips for electronic toys within a relevant range of 61,600 to 100,800 memory chips per year. Within this range, the following partially completed manufacturing cost schedule has been prepared:
Components produced 61,600 79,200 100,800
Total costs:
Total variable costs . . . . . . . . . $19,712 (d) (j)
Total fixed costs . . . . . . . . . . . . 22,176 (e) (k)
Total costs . . . . . . . . . . . . . . . . . $41,888 (f) (l)
Cost per unit:
Variable cost per unit . . . . . . . (a) (g) (m)
Fixed cost per unit . . . . . . . . . . (b) (h) (n)
Total cost per unit . . . . . . . . . . (c) (i) (o)
Complete the cost schedule below. When computing the cost per unit, round to two decimal places. Round all other values to the nearest dollar.
Cost Report
Components produced 61,600 79,200 100,800
Total costs:
Total variable costs $19,712 (d) $ (j) $
Total fixed costs 22,176 (e) (k)
Total costs $41,888 (f) $ (l) $
Cost per Unit
Variable cost per unit (a) $ (g) $ (m) $
Fixed cost per unit (b) (h) (n)
Total cost per unit (c) $ (i) $ (o) $
Answer:
Variable cost per unit is constant.
Total fixed cost is constant.
Explanation:
In Washburn's factory, what is the break-even point for the new line of guitars if the retail price is (a) $349, (b) $389, and (c) $309? Also, (d) if Washburn achieves the sales target of 2,000 units at the $349 retail price, what will its profit be?
Answer:
a. 186 units
b. 156 units
c. 232 units
d. $370,000
Explanation:
a. Calculation to determine the break-even point for the new line of guitars if the retail price is $349
Using this formula
Break-even point quantity = Fixed cost / Unit price – Unit variable cost
Let plug in the formula
Break-even point quantity = ($14,000 + $4,000 + $20,000) / $349 – ($25 + $120)
Break-even point quantity= $38,000 / $349 - $145
Break-even point quantity= $38,000 / $204
Break-even point quantity= 186.27
Break-even point quantity= 186 units
Therefore the break-even point for the new line of guitars if the retail price is $349 will be 186 units
b. Calculation to determine the break-even point for the new line of guitars if the retail price is $389
Break-even point quantity = ($14,000 + $4,000 + $20,000) / $389 – ($25 + $120)
Break-even point quantity= $38,000 / $389 - $145
Break-even point quantity= $38,000 / $244= 155.74
Break-even point quantity = 156 units (Approximately)
Therefore Therefore the break-even point for the new line of guitars if the retail price is $389 will be 156 units
c. Calculation to determine the break-even point for the new line of guitars if the retail price is $309
Break-even point quantity=($14,000+$4,000+$20,000)/$309 – ($25 + $120)
Break-even point quantity= $38,000 / $309 - $145
Break-even point quantity= $38,000 / $164
Break-even point quantity= 231.71
Break-even point quantity = 232 units (Approximately)
Therefore the break-even point for the new line of guitars if the retail price is $309 will be 232 units
d. Calculation to determine what will its profit be
if Washburn achieves the sales target of 2,000 units at the $349 retail price
Using this formula
Profit = Total revenue – Total cost
Profit= (P x Q) – [FC + (UVC x Q)]
Let plug in the formula
Profit= ($349 x 2000) – [$38,000 + ($145 x 2,000)]
Profit= $698,000 – $328,000
Profit= $370,000
Therefore the profit will be $370,000
By appropriately preparing a forecast budget, a company can avoid __________. a net loss inventory shortages insolvency regulation
Answer:
insolvency
Explanation:
A budget is a financial plan used for the estimation of revenue and expenditures of an individual, organization or government for a specified period of time, often one year. Budgets are usually compiled, analyzed and re-evaluated on periodic basis.
The first step of the budgeting process is to prepare a list of each type of income and expense that will be part of the budget.
The benefits of having a budget is that it aids in setting goals, earmarking revenues and resources, measuring outcomes and planning against contingencies.
A specialized budget can be defined as a financial plan that is typically focused on specific assets or activity of a master (comprehensive) budget.
In conclusion, by appropriately preparing a forecast budget, a company can avoid insolvency.
a)What are the expected returns and standard deviations of a portfolio consisting of:1.100 percent in stock A
Answer:
12%
1.00
Explanation:
Note that the expected return on stock A which is 12% is missing from the question as well as the standard deviation of A which is 1.00
The expected return from stock A with 100% of funds(total amount of investment) invested in stock A is the percentage invested in A multiplied by the expected return of stock A shown thus:
expected return=100%*12%
portfolio expected return=12%
portfolio standard deviation(if 100% invested in A)=1.00*100%
Flying Cloud Co. has the following operating data for its manufacturing operations:
Unit selling price $ 350
Unit variable cost $ 100
Total fixed costs $980,000
The company has decided to increase the wages of hourly workers which will increase the unit variable cost by 10%. Increases in the salaries of factory supervisors and property taxes for the factory will increase fixed costs by 5%. If sales prices are held constant, the next break-even point for Flying Cloud Co. will be:__________
a) increased by 368 units
b) decreased by 368 units
c) increased by 132 units
d) decreased by 264 units
Answer:
a) increased by 368 units
Explanation:
The calculation of the next break even point should be
Existing break-even point for Flying Cloud Co. is
= Fixed Cost ÷ Contribution Margin Per Unit
= Fixed Cost ÷ Sales Price Per Unit - Variable Cost per Unit
= $980,000 ÷ ( $350 - $100)
= 3,920 Units
Now
Revised Variable cost = $100 × 110%
= $110
And,
Revised Fixed cost = $980,000 × 105%
= $1,029,000
So,
Revised break-even point for Flying Cloud Co. is
= Fixed Cost ÷ ( Contribution Margin Per Unit
= Fixed Cost ÷ ( Sales Price Per Unit - Variable Cost per Unit
= $1,029,000 ÷ ( ( $350 -$110)
= 4,287.5
= 4,288 units
So,
Increase = 4,288 Units - 3920 Units
= 368 Units Increase
define accounting ?
Answer:
Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing and reporting these transactions to oversight agencies, regulators and tax collection entities.
Answer:
the action or process of keeping financial accounts.
Explanation:
You decide to buy 1,800 shares of stock at a price of $68 and an initial margin of 75 percent. What is the maximum percentage decline in the stock price before you will receive a margin call if the maintenance margin is 30 percent
Answer:
Decline percentage = 64.29%
Explanation:
First find the margin call price = Initial price x (1 - initial margin) / (1-maintenance margin)
Margin call price = 68 x ( 1- 75%) / (1 - 30%)
Margin call price = $24.29
The margin call that the investor will have if the price fall to $24.29.
Now find the percentage decline:
Percentage decline = (68 - 24.29) / 68
Percentage decline = 0.6429
Thus decline percentage = 64.29%
what is the meaning of want
Answer:
Want is to desire something or to yearn. (EX. I want an ice cream.) Want is showing that you would like something basically
Explanation:
Milltown Company specializes in selling used cars. During the month, the dealership sold 32 cars at an average price of $16,000 each. The budget for the month was to sell 30 cars at an average price of $17,000. Compute the dealership's sales price variance for the month.
Answer:
-$32,000
Explanation:
The sales price variance is a measure used determine the difference between an entity's expected price of a product or service and its actual sales price. It may be favorable or unfavourable to the company and may be calculated as
Sales price variance = Actual quantity sold * (actual selling price - budgeted selling price)
Hence given that the dealership sold 32 cars at an average price of $16,000 each while the budget was to sell 30 cars at an average price of $17,000,
Sales price variance = 32 ($16,000 - $17,000)
= -$32,000
The minus indicates unfavourable sales price variance
Suppose you entered a contract to buy your friend's iPad. Without your knowledge, it was malfunctioning at the time you bought it, and it died soon after you started using it. Your friend had recently removed a large number of applications from the iPad that were not working. Although he honestly thought the problem was with the applications and not the iPad itself, he failed to tell you about the problem. You reasonably concluded, based on your inspection of all of the current applications on the iPad, that it was functioning properly. Can you rescind the contract to buy the iPad?
a. Yes, due to fraud.
b. Yes, due to innocent misrepresentation.
c. Yes, due to mutual mistake.
d. Yes, due to undue influence.
e. No, the latent malfunction was not material, because the iPad was functioning when you bought it.
Answer:
Can you rescind the contract to buy the iPad?
b. Yes, due to innocent misrepresentation.
Explanation:
You can rescind the contract without damages or you claim damages based on the loss that you have already incurred for the contract. An innocent misrepresentation occurs when the misrepresentation is not fraudulent nor negligent. Therefore, you can rescind the contract or affirm it. But if the misrepresentation is fraudulent or negligent, you can rescind the contract as well as claim damages.
Hill Company uses the periodic inventory system. It records a transaction that increases the balances in its purchases and accounts payable accounts. Which of the following is true about Hill Company?
a. When the related merchandise is sold, the purchases account will be decreased by the related cost of goods sold.
b. The manner in which this transaction was recorded indicates that Hill returned $6,000 of merchandise to a supplier.
c. The balance in the account will appear on the balance sheet at year end.
d. The manner in which this transaction was recorded indicates that Hill purchased inventory on account.
Answer:
Hill Company
The true statement about Hill Company is:
d. The manner in which this transaction was recorded indicates that Hill purchased inventory on account.
Explanation:
Purchases made on account (or credit terms) are debited to the Purchases account (periodic inventory system) and credited to the Accounts Payable account. This increases the amount of purchases and the accounts payable account respectively by the same amount. If Hill Company uses the perpetual inventory system, the debit goes to the Inventory account and the corresponding credit to the Accounts Payable account.
Discuss various factors that must be considered on the warehouse location decisions?
Answer:
burglar proofing
Explanation:
security
Question 3
Rank the following assets of a commercial bank in order of decreasing liquidity.
(a) Market loans
(b) Reserves with the Bank of Ghana
(c) Cash
(d) Personal loans
(e) Sale and repurchase agreements (repos)
(f) Mortgages
(g) Government bonds (of from one to five years to maturity)
Answer:
Reserves with the Bank of Ghana
Explanation:
I could be wrong let me know if its correct or incorrect
Advantages of equity financing over debt financing include that: Multiple Choice equity financing does not require repayment. dividends are mandatory. stockholders' control will increase. dividends are tax deductible.
Answer: equity financing does not require repayment.
Explanation:
Equity financing simply means a method of financing which has to do with the sale of shares. Debt financing occurs when money is raised by a company through the sale of debt instruments to the investors.
It should be noted that equity financing is the opposite of debt financing. Unlike the debt financing, equity finance doesn't carry a repayment obligation. In this case, the investors purchase the shares in the company and they make money through the dividends gotten or through the eventual sale of shares.
Also, there is less risky with the equity financing as there's no fixed monthly loan payments to make and this can be of immense benefit to startup businesses.
