Debt Financing
Raising money by borrowing, with an obligation to repay the principal plus interest.
Interest is a business expense that appears on the income statement; the principal repayment does not, because it retires a liability rather than consuming a resource.
Often Confused With
- Equity Financing
- Debt is repaid and then ends; equity is never repaid and never ends.
Taught In
See Also
3.5.B.1 · 3.5.B.1.i