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Debt Financing: Definition and How It Works

By Kristi WaterworthUpdated Apr 3, 2025 at 12:54 AM

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.

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