Problem
Your friend has just completed his degree in pharmaceutical sciences. He told you that he along with his friends established a startup pharmaceutical company. Being a well-trained pharmacist and coming from a business family, your friend expects that his company has growth potential and although it is still a startup, in the future, it may turn out to be a big pharmaceutical company in UAE. After explaining his business model to you, your friend asked you that he needs money for the business. He gave you the option of investing in business as equity or debt. Based on your understanding of the risk and return characteristics of debt and equity, elaborate on whether you contribute as debt or as an equity investor in your cousin's business. Also, elaborate on the factors that will influence your decision.