Debt

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Debt refers to assets or an amount of money borrowed by an entity from another. The money is paid back at a date that is specified in the contract between the debtor and the creditor. Debt is used by the borrower to make large purchases, which they would otherwise be unable to afford. With reference to assets, debt represents the future purchasing power that is used in the present day.

Loans, commercial paper, and bonds are examples of different types of debt. Debt is usually repaid back in the present value along with a sum that is accounted as interest.

Important concepts related to debt:

  • Accounts payable
  • Funded debt
  • Collection agency
  • Liability
  • Debenture
  • Net Debt
  • Debt security
  • Non-recourse debt
  • Debt/equity ratio


Contents

[edit] Public Debt

This is the debt taken on by governments to fund budget shortfalls. In the wake of the Financial Crisis, public debt levels have rocketed.

Economist Article on Public Debt ,June 2009

[edit] Examples of debt

Various types of bonds and commercial papers issued by business establishments are most common examples of debt. Loans may also be called debt. Normally companies issue bonds or commercial papers when they have to carry out a particular business operation and do not have sufficient funds for it. Loans are taken by individuals when they experience financial shortage.

[edit] Accounts payable

Accounts payable is an accounting entry. It basically represents the various short term debts that a business establishment needs to pay to its creditors in a short span of time. In a balance sheet accounts payable are listed in current liabilities section.

[edit] Collection agency

Collection agency is an agency that is hired by lenders for purposes of collecting payments from borrowers. At times, they are also engaged to recollect payments that have fallen due for a significant period of time like a month or two for example. At times lenders have individual divisions that act as collection agencies.

[edit] Debt instruments

Debt instruments are basically the written contracts used to repay the debt.

[edit] Debt management

A large number of companies provide debt management tips.

[edit] See also

[edit] Reference

[edit] External links

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