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

External equity finance involves raising capital by selling shares in the company to outside investors. One primary characteristic of this type of financing is that it can lead to diluted business ownership (Option D). When new shares are issued, existing shareholders' ownership percentage is reduced unless they purchase additional shares to maintain their stake. This is a key distinction between equity and debt financing, where debt does not dilute ownership but has the requirement of repayment and interest.

In contrast to the other options:

• Specific maturity date (A) does not apply to equity financing as equity does not have a maturity date.
• Low interest payments (B) is more associated with debt financing rather than equity.
• Fixed returns to owners (C) does not characterize equity since returns (dividends) vary and are not guaranteed.

Thus, the correct answer is D.