Debt

Debt is the amount of money borrowed by a business that must be repaid, usually with interest.

Explanation:
Debt includes loans, bonds, and other financing methods. It can be:

• Short-term debt (due within 1 year)
• Long-term debt (due after 1 year)

Example:
A business takes a $50,000 bank loan repayable over 5 years—that’s long-term debt.

Importance:
Debt can help finance growth but also increases financial risk.

Common Confusion:
Debt is a liability, not an expense, and it includes both principal and interest.