Which of the following best defines debt financing?

Debt financing is best defined as borrowing capital that must be repaid over time. This method involves obtaining funds through loans or debt securities, such as bonds, which the company must pay back with interest over a specified period.

This approach allows businesses to access necessary capital without diluting ownership, as it does not require giving away any equity in the company. The obligation to repay capital raised through debt means that a company will need to ensure it generates sufficient cash flow to meet its repayments. Debt financing can be beneficial because it enables companies to leverage their growth potential while maintaining full ownership control.

The other options provided describe alternative methods of raising funds. Selling shares of stock refers to equity financing, while direct investments from owners pertains to personal contributions made by individuals involved in the company. Reinvesting profits into the company reflects retained earnings, another form of funding that does not involve borrowing or external sources. These distinctions highlight the unique characteristics of debt financing and its implications for managing a business's financial strategy.