The increase in overall debt within a specific period is determined by subtracting the amount of debt repaid from the amount of debt incurred. For example, if a company borrows $1,000,000 and repays $200,000 during the year, the calculated value is $800,000, representing the change in the company’s debt position.
Understanding the fluctuations in borrowing levels provides critical insights into an entitys financial strategy and health. Analyzing this metric enables stakeholders to assess an entitys reliance on debt financing, which influences investment decisions and risk assessments. Changes in borrowing amounts reflect shifts in operational needs, investment strategies, or economic conditions.