Definition of debt
- unable to pay off his debts
- owe them a debt of gratitude
- a criminal's debt to society
- deeply in debt to creditors
He is trying to pay off gambling debts.
The company has run up huge debts.
Their debts are piling up.
He's been working three jobs in an attempt to get out of debt.
The company was in debt but is now turning a profit.
I am deep in debt.
I'm thousands of dollars in debt.
She went into debt to pay for college.
I'm worried that we will fall into debt.
These example sentences are selected automatically from various online news sources to reflect current usage of the word 'debt.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.
First Known Use: 13th centurySee Words from the same year
In the business world, debt is an amount borrowed.
For example, let's assume Company XYZ has invented a new product that will revolutionize the widget market. The company is certain there will be demand from billions of people around the world, and therefore it needs to build a new factory. If Company XYZ's funds for constructing the factory were limited to its cash on hand, say $200,000, it certainly could not build the kind of factory it needs to capitalize on this tremendous opportunity and would thus be very limited in its output and profits (and would leave the market wide open for competitors to fill the void). With some debt, however, Company XYZ could build the factory and take advantage of the profit potential of its product. The debt essentially magnifies the profits.
Debt is a liability, meaning that the lender has a claim on a company’s assets. Debt due within one year is generally classified as short-term debt on a company’s balance sheet. Debt due in more than one year is considered long-term debt. It is important to note here that debt commonly comes to mind when one considers liabilities, but not all liabilities are debt. Companies may incur several other types of liabilities, including (but not limited to) upcoming payroll, bonuses, legal settlements, payments to vendors, certain derivatives, contracts, certain types of leases, and required stock redemptions. Common balance sheet categories for liabilities include accounts payable, accrued expenses and debt.
Information about a company’s debt is a key component of accurate financial reporting and a crucial part of thorough financial analysis. Excessive debt can ruin a company but is not always detrimental. The use of debt financing can magnify profits that would have otherwise gone unrealized.
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