Businesses need money to grow (build factories, hire marketers, develop software). They have to get this capital from somewhere.

• Debt is generally cheaper but riskier. If you take out a massive bank loan and your new product fails, the bank can force you into bankruptcy.

• Equity is safer but more expensive. If you sell 20% of your company to a venture capitalist and the product fails, you don't owe them a refund. But if the company becomes the next Google, you just gave away billions of dollars.

Companies constantly balance Debt and Equity to find their optimal "Cost of Capital." When a CMO proposes a $2 Million marketing campaign, the CEO is thinking: "Our cost to borrow that $2M is 8%. Will this marketing campaign generate a return higher than 8%? If not, we are destroying value."