Debt

AAA

DEFINITION of 'Debt'

An amount of money borrowed by one party from another. Many corporations/individuals use debt as a method for making large purchases that they could not afford under normal circumstances. A debt arrangement gives the borrowing party permission to borrow money under the condition that it is to be paid back at a later date, usually with interest.

INVESTOPEDIA EXPLAINS 'Debt'

Bonds, loans and commercial paper are all examples of debt. For example, a company may look to borrow $1 million so they can buy a certain piece of equipment. In this case, the debt of $1 million will need to be paid back (with interest owing) to the creditor at a later date.

VIDEO

Loading the player...
RELATED TERMS
  1. Debt Ceiling

    The maximum amount of monies the United States can borrow. The ...
  2. Senior Debt

    Borrowed money that a company must repay first if it goes out ...
  3. Collection Agency

    A company hired by lenders to recover funds that are past due ...
  4. Unsecured Debt

    A loan not backed by an underlying asset. Unsecured debt includes ...
  5. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to ...
  6. Competitive Tender

    An auction process through which large institutional investors ...
RELATED FAQS
  1. What debt/equity ratio is average in the automotive sector?

    Investors and creditors assess an automotive sector company's financial stability and health by determining its debt-to-equity ... Read Full Answer >>
  2. What debt level should I look for when investing in an oil and gas company?

    Investors should look for debt level in an oil and gas company that is appropriate for their risk tolerance. In a bull market ... Read Full Answer >>
  3. Is credit counseling as damaging as bankruptcy on my credit report?

    Credit counseling is not as damaging as bankruptcy to your credit report. Credit counseling ends up being noted on your credit ... Read Full Answer >>
  4. Which is better: A high or low equity multiplier?

    An equity multiplier measures a company's financial leverage by using a ratio of the company's total assets to its stockholders' ... Read Full Answer >>
  5. What can I tell about a company by looking at its solvency ratios?

    Solvency ratios gauge a company's financial health and its ability to meet long-term obligations. Use solvency ratios to ... Read Full Answer >>
  6. What impact would deflation have on the national debt?

    Deflation is a scenario where there are falling prices of goods and services across the economy. Although the ability to ... Read Full Answer >>
  7. What is a debt/equity swap?

    Occasionally, a company will need to undergo some financial restructuring to better position itself for long term success. ... Read Full Answer >>
Related Articles
  1. Economics

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  2. Investing Basics

    Will Corporate Debt Drag Your Stock Down?

    Borrowed funds can mean a leg up for companies or the boot for investors. Find out how to tell the difference.
  3. Budgeting

    How Much Debt Can You Handle?

    Follow these five steps to manage debt without cutting up your credit cards.
  4. Credit & Loans

    Should You Close Your Credit Card?

    Find out the consequences before deciding to end your credit agreement.
  5. Investing Basics

    What Is A Corporate Credit Rating?

    Is the bond you're buying investment grade, or just junk? Find out how to check the score.
  6. Retirement

    Test Your Money Personality

    Find out which of the five profiles fits your style, and how this will affect your future.
  7. Credit & Loans

    Digging Out Of Personal Debt

    Find out why good intentions can put consumers in an even bigger hole than before.
  8. Credit & Loans

    Can You Live A Debt-Free Life?

    Avoiding loans goes against the norm but it can be possible - and enjoyable.
  9. Professionals

    Top 10 Ways To Avoid Burnout In Corporate Finance

    Burnout rates in the corporate finance field are extremely high. Find out some of the most common causes, and how to prevent them.
  10. Investing

    Debt Reckoning

    Learn about debt ratios and how to use them to assess a company's financial health. You could save a lot of money!

You May Also Like

Hot Definitions
  1. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  2. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  3. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  4. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  5. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  6. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!