Debt capital is that part of a company's capital that comes from external lenders and creditors, as opposed to equity, which comes from the owners. External capital typically includes loans, credits and accounts payable.
Debt capital is important for financing growth and operations, but also entails an obligation to pay interest and installments. A high proportion of debt capital can increase a company's financial risk because it must be able to honor its debt obligations regardless of earnings.
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Et hurtigt overblik over fremmedkapital.
What exactly is debt capital?
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Fremmedkapital is the part of a company's capital which originates from external lenders and creditors, as opposed to equity capital, which comes from the owners. External capital typically includes loans, credits and accounts payable.
What is included in debt capital?
Short-term debt – e.g. supplier debt, bank overdraft and other debt due within one year.
Long-term debt – e.g. mortgage loans, bank loans and bond debt with longer maturities.
Any other external financing – leasing agreements, factoring or other debt obligations.
Meaning
Debt capital is important for financing growth and operations, but also entails an obligation to pay interest and installments. A high proportion of debt capital can increase a company's financial risk because it must be able to honor its debt obligations regardless of earnings.
Key figures and analysis
When assessing a company's financial strength, one often looks at the ratio between equity and debt capital, for example through equity ratio or debt ratio. These show how robust the company is in terms of debt obligations.
Example
A company has assets worth DKK 10 million. DKK 3 million of this DKK is financed with equity, while DKK 7 million is financed through bank loans and accounts payable. The DKK 7 million constitutes the company's debt capital.
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