Debt Finance
Raising capital through borrowing; must repay with interest.
Formula
Annual Interest Cost = Principal × Interest Rate
Real World
When Tesco needed to fund its store expansion programme, it issued corporate bonds — a form of debt finance — allowing it to raise hundreds of millions while retaining full shareholder ownership.
Exam Focus
Contrast debt finance with equity finance on ownership dilution and repayment obligation — examiners expect both trade-offs in any 'evaluate' response.
How well did you know this?