Funds raised through borrowing is called what?

Funds raised through borrowing is called what?

• A. Equity Financing
• B. Debt Financing
• C. Profitability Ratios
• D. Activity Ratios

Answer: (B)

When funds are raised through borrowing, the company takes on a debt obligation and must repay the principal with interest. This method is called debt financing. It’s one of the two main ways firms raise capital: debt financing (loans, bonds, lines of credit) and equity financing (selling ownership shares). The other options refer to metrics, not how money is raised: profitability ratios measure profit relative to sales or assets, and activity ratios assess how efficiently assets are used. So the term for funds raised by borrowing is debt financing.

When funds are raised through borrowing, the company takes on a debt obligation and must repay the principal with interest. This method is called debt financing. It’s one of the two main ways firms raise capital: debt financing (loans, bonds, lines of credit) and equity financing (selling ownership shares). The other options refer to metrics, not how money is raised: profitability ratios measure profit relative to sales or assets, and activity ratios assess how efficiently assets are used. So the term for funds raised by borrowing is debt financing.