Debt capital

The debt capital of a company is shown on the balance sheet and defined as the difference between assets and shareholders’ equity. A company’s debt capital consists of obligations vis-à-vis third parties, e.g. bank credits, loans and bonds that have been issued. Depending on the term of those obligations, a differentiation is made between short-term and long-term liabilities. The entitlements of providers of debt capital (e.g. investors who own the company’s bonds) differ from those of providers of equity capital. For having provided debt capital, an investor earns comparatively lower interest, but at the same time assumes less risk. Moreover, providers of debt capital have no ownership rights in the company (e.g. voting rights) or a claim on the company’s assets (e.g. to dividends).

See alsoShareholders’ equity