Advantages and Disadvantages of Equity and Debt Financing on Lyft Inc.'s Fund Raising

Lyft Inc. was established in 2012 by John Zimmer and Logan Green, who are computer programmers. The company operates in a peer-to-peer marketplace to meet the on-demand ridesharing in Canada and the United States of America (USA). Lyft works in the same way as Uber. With the current advancement of technology, Lyft uses an application that connects riders with drivers. By using the app, the rider can book a ride from the nearest driver. The app uses Google Map to show riders the location of cars ready for a ride. The paper focuses on estimating the cost of raising funds using equity and debt and explains the advantages and disadvantages of raising funds through debt or equity. Since Lyft was founded after Uber, there was the stiff competition that obliged the company to get proper financing so that it can grow and expand. Up-to-date, Lyft has borrowed more than $4.91 billion through equity funding. In particular, equity financing refers to the process of raising funds by selling shares. Companies like Lyft use this method to raise money so that they can pay short-term bills and invest well to facilitate the achievement of long-term objectives. Lyft has raised over $2.22 billion through borrowing (Yahoo Finance, 2021). When it comes to debt financing, a firm raises money by selling instruments, such as bills or bonds, from investors. Consequently, raising funds using equity or debt enables a company to get enough money for growth and expansion in the short and long term. Equity financing can be done by raising funds from friends and families, investors, venture capitalists, and crowd-sourced funding. Indeed, one of its primary advantages is that the firm gets freedom from the debt acquired. The company does not repay on investments. Another benefit of equity financing...