Debt is simply money you owe. When a person or company borrows money, they take on debt with an obligation to repay the principal plus interest over a specified period.
Debt comes in many forms: bank loans, bonds, mortgages, credit card balances, and lines of credit. For businesses, debt can be a powerful tool — it allows expansion without giving up ownership (unlike equity financing).
However, too much debt is dangerous. If a company cannot make its interest payments, it risks default and bankruptcy. The debt-to-equity ratio is a key metric investors use to gauge how leveraged a company is.