Which type of funding relies on the sale of ownership stakes?

Equity financing is the correct choice as it involves raising capital through the sale of ownership stakes in a company, typically in the form of shares. This means that when a company opts for equity financing, it gives investors a share of ownership in exchange for their investment. These investors then hope to benefit from the company's growth and profitability through dividends or an appreciation in the value of their shares. This type of funding is often favored by startups and growth-oriented companies because it does not require the company to repay the funds like debt financing does, and instead ties the investors’ returns to the company's performance.

In contrast, debt financing involves borrowing money that must be repaid over time, often with interest, but does not involve giving up ownership in the company. Venture capital is a specific subset of equity financing, where investors provide funds to startup companies in exchange for equity and often additional involvement in management. Bank loans are another form of debt financing, again devoid of ownership transfer, requiring repayment with interest. Understanding these distinctions helps in grasping how various funding options impact a company's structure and financial obligations.