Debt financing is essentiallyMultiple Choiceborrowing money.selling ownership.borrowing ownership.selling money.the same as stock.

Understanding Debt Financing

1. Definition of Debt Financing: Debt financing refers to the process of raising funds by borrowing money, typically in the form of loans or bonds. This capital must be paid back with interest over a specified period.

2. Characteristics of Debt Financing:

   • Borrowing Money: It involves taking loans from financial institutions or issuing bonds to investors.
   • Obligation to Repay: Unlike selling ownership (equity), debt financing creates an obligation to repay the principal amount with interest, which does not affect the ownership percentage of the company.
   • Interest Payments: Payments must be made on a scheduled basis until the debt is fully repaid.

Evaluation of Options

1. Borrowing Money: This option accurately describes debt financing.
2. Selling Ownership: This refers to equity financing, not debt.
3. Borrowing Ownership: This is not a recognized term in finance and is incorrect.
4. Selling Money: This is a nonsensical phrase in financial terms.
5. The Same as Stock: Debt financing and stock represent different concepts (debt vs. equity).

Final Answer

The correct answer is borrowing money. Debt financing primarily involves obtaining funds by taking on debt, which must be repaid with interest.