Borrowing As a Commercial Activity
Borrowing is the Act of lending some asset to a person by another person who expects to get it back with or with no interest in future. It is a commercial activity common among individuals and companies alike. Debitum in Latin means "debt", derived from the verb debere, "to owe". Debentures, in simple language, are the debt instrument used by companies to borrow money. It is an instrument through which a company borrows money from lenders, who expect to get their money back plus the interest. Let us first understand what debt is? Debt can be described as an obligation to pay. It is possible to state that when a company borrows funds from investors (or lenders) and does not return them within the specified period along with interest on them, it becomes a debt for the company. Debt could be categorized into two different types depending upon its duration, long-term Debt and short-term Debt. These categories are based on the timeline or periodicity of repayment. L...