Which definition best describes 'debt financing'?

The definition of 'debt financing' that best fits is borrowing funds to be paid back with interest. This method involves a business or individual securing capital by borrowing money from lenders, which can be in the form of loans, bonds, or lines of credit. The key characteristic of debt financing is the obligation to repay the borrowed amount, typically along with interest, over a specified period.

This approach allows entities to access immediate capital while maintaining ownership since the lenders do not claim equity in the company. The interest payments made on the debt can sometimes be tax-deductible, making debt financing an attractive option for raising capital. The emphasis on repayment with interest highlights the critical aspect of accommodating lenders’ risks and maintaining a positive relationship with credit providers.

In contrast, the other options involve different financial strategies. Selling shares represents equity financing, while reinvesting profits refers to retained earnings, and acquiring assets without repayment does not accurately represent a standard financing method, particularly since it implies the absence of a financial obligation.