Questions:
William is the sole owner of Catco. On its balance sheet, Catco has the following assets:

Cash: $30,000 
Account Receivable: $20,000
Office Building: $100,000
Warehouse Building: $30,000
5 Trucks($4,000 each): $20,000
Office Equipment: $30,000
Warehouse Equipment: $20,000
Inventory: $50,000

Catco also owes the following liabilities:

Bank loan: $50,000
Accounts Payable: $50,000
Credit card balance: $20,000

What's Catco total owner's Equity?

Assume Catco will be launching new product line for which it needs $5 million investment. Due to circumstance, Catco wants to increase its tax deduction as much as possible. Given this information, what would be the preferred way of raising this investment?

Reference answers:
$300,000 (assets) - $120,000 (liabilities) = $180,000

This $180,000 represents William's stake in Catco. That is, his financial interest in the business.

Debt financing involves out loans or issuing bonds to raise capital. Importantly, businesses can deduct the interest paid on these obligations from their taxes, lowering their tax liability.

Equity financing, on the other hand, does not provide this tax benefit when shares are sold to investors. Since interest payments are not made with equity financing, there is no tax deduction associated with it.

Hence, Catco's preferred way of raising $5 million investment is to get external financing through debt.