Question

what is debt and equity​

Answer 1

Answer:

Explanation:

Equity refers to the stock, indicating the ownership interest in the company.

On the contrary,

debt is the sum of money borrowed by the company from bank or external parties, that required to be repaid after certain years, along with interest.

Answer 2

Answer:

Explanation:

DEBT

Debt is an amount of money borrowed by one party from another with an obligation to return that borrowed amount back to the party from which it is borrowed.

Equity

Equity in accounting terms can be calculated as Assets -Liabilities . Equity is basically owners funds.

KEY DIFFERENCE;

The key difference between Debt and Equity instruments is in Risk absorption Capacity.

The Equity Instruments have full Risk Absorption while Debt instruments have no or lesser Risk absorption Capacity.

Risk absorption means whether the investor will lose if the instrument issuing entity incurs losses