Distinguish between debt capital and equity capital as sources of finance for the expansion of Kilronan Ltd. - Leaving Cert Business - Question B - 2011

With equity capital, there is no obligation to pay dividends; however, equity holders expect some return. Debt capital requires regular interest payments, which must be made irrespective of the company's financial performance.

Equity capital is generally considered lower risk compared to debt capital. If Kilronan Ltd experiences losses, equity shareholders might not receive dividends but won't face bankruptcy. In contrast, debt capital presents a higher risk; failure to meet repayment obligations could lead to bankruptcy.

Equity capital does not generally require collateral. On the other hand, debt capital often requires the provision of security or collateral, which could include assets of Kilronan Ltd.

Dividends paid to ordinary shareholders are not deductible for tax purposes, while interest repayments on debt capital are typically tax-deductible, which can be beneficial for Kilronan Ltd.