How do you define "debt financing"?

Debt financing is defined as borrowing funds from external sources, which must be repaid over time, typically with interest. This form of financing allows businesses to obtain the necessary capital to invest in operations, expand, or manage cash flow without giving up ownership or equity in the company. Companies may use debt financing through loans, bonds, or credit lines, making it a critical tool for leveraging growth while managing financial obligations.

The other options represent different methods of securing funds but do not involve borrowing. Utilizing company profits represents self-financing, while selling stock involves equity financing, providing ownership stakes to investors rather than a liability to repay. Using cash reserves indicates reliance on existing funds rather than external borrowing. Thus, the defining characteristic of debt financing is the necessity of repayment, aligning it with the correct answer.