What is a characteristic of external equity finance? (A) Specific maturity date (B) Low interest payments (C) Fixed returns to owners (D) Diluted business ownership - HSC - SSCE Business Studies - Question 10 - 2015 - Paper 1

When considering the characteristics of external equity finance, it is important to understand what distinguishes it from other forms of financing.

External equity finance involves raising capital by selling shares in the business to outside investors. One of the main characteristics of this type of financing is that it results in diluted business ownership.

Unlike debt financing, where the obligation to repay the loan is fixed, external equity does not have a specific maturity date nor does it guarantee fixed returns to owners. Investors typically participate in the potential upside of a business through dividends or appreciation in share value, rather than fixed returns.

Therefore, the correct choice that describes a characteristic of external equity finance is:

(D) Diluted business ownership.