What is a key advantage of equity financing?

Equity financing involves raising capital through the sale of shares in a business. One key advantage of this financing method is that it does not require repayment like loans do, as there are no interest payments associated with equity. Instead, investors become part owners of the company and may receive dividends based on the company's profitability. However, the absence of interest payments means that, particularly in the early stages of a business, equity financing can be less costly in terms of cash flow compared to debt financing.

This option highlights that equity financing can be less of a financial burden in the short term, especially for start-ups or businesses in a growth phase that may not yet have stable cash flows. The other options incorrectly imply that equity financing has strict repayment obligations or high costs associated with dividends, but the reality is that equity allows for more flexibility in managing cash flow and financial obligations.