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Debt financing is a kind of financing that involves an interest-bearing instrument, usually a loan, the payment of which is not directly tied to the venture's sales and earnings.
What Exactly Is Financing?
The process of supplying funds for commercial activities, purchases, or investments is known as financing. Banks and other financial institutions are in the business of providing capital to businesses, consumers, and investors to help them achieve their objectives. Financing is essential in any economic system because it allows businesses to purchase things that are out of their immediate reach. To put it another way, financing is a method of leveraging the temporal value of money (TVM) to put future predicted money flows to use for initiatives that begin now. Financing also takes advantage of the fact that some people in an economy will have a surplus of money they want to put to work to generate returns, while others will need money to invest, creating a market for financing.
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