Debt Finance
Raising capital through borrowing; must repay with interest.
Formula
Annual Interest Cost = Principal × Interest Rate
Real World
When easyJet needed to purchase new Airbus A320neo aircraft, it issued corporate bonds — a form of debt finance — giving bondholders a fixed annual return while easyJet retained full ownership of the business.
Exam Focus
Always contrast debt finance with equity finance on ownership dilution — 'compare' questions require a direct link between the two.
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