Please ensure Javascript is enabled for purposes of website accessibility
Search
Accessibility Menu

Debt Financing: Definition and How It Works

By Kristi Waterworth – Updated Apr 3, 2025 at 12:54AM

Key Points

  • Debt financing involves a company borrowing funds to cover costs, carrying the risk of regular repayments.
  • Investors should examine a company's debt levels using the debt-to-equity ratio to assess financial health against industry peers.
  • Comparing this ratio with competitors provides insight into responsible debt usage and potential financial risks.
Key findings are powered by ChatGPT and based solely off the content from this article. Findings are reviewed by our editorial team. The author and editors take ultimate responsibility for the content.

Our Guides

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.