explanation



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What exactly are debt,equity ,shares & are they related,if yes,then how?

2 Answer(s)


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Debt is nothing but loans that a company borrows from banks etc.

Equity is the ownership in the company by the promoters.

Shares are a financial instrument using which equity is owned by an investor.

They are related in the sense that if a company wants to raise new money, they have 2 options - Equity or Debt. So both these are instruments using which new cash can be raised by the company

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So for example if you start your own company, and you need 10 lakhs of cash. If you borrow that money from a bank it is called debt.
If you invest the money from your own savings then you own equity in the company,