Question

how non-tech companies may be different in sources of financing from tech companies. Discuss.

Answer 1

ANSWER DOWN BELOW. FEEL FREE TO ASK ANY DOUBTS. THUMBS UP PLEASE.

Capital structure refers to the mix of a company's capitalisation. That is a
a mix of long term sources of funds such as debentures,
preference share capital, equity share capital and retained
earnings. It is for meeting the total capital requirement.

While choosing
a suitable Capital structure various factors need to be taken into consideration like cost, risk,
control, flexibility and other considerations like nature of
industry, competition in the industry etc.

Main answer:

Tech companies generally prefer more equity in its capital structure.

If a company is an asset-light business like a software company (Tech company) or internet company then it can use equity for its growth.

If a company is an asset-heavy business and it is investing heavily on the project then it should use debt financing because debt financing is the cheapest source of long term capital.
Example: if a utility company investing heavily on a power plant then it should be using debt financing for its growth in its capital structure.

A higher competitive business should use less debt for its growth.
Ex: Retail business.

A more stable business can use equity for its growth.
Example: Microsoft.