Could someone please help me understand the differences between debt and pledge with regards to evaluating a company’s financials.
As far as I understand debt is generally raised to money to use in the business. This debt has an interest rate which is to be paid as per mutually agreed terms. The collateral in case of debt is generally assets which are hypothecated to the financing company.
I think maybe pledge is also a similar thing where the collateral is the promoter’s shareholding/ownership in the business.
It would be really helpful if some one could confirm whether this understanding is correct or not. And what are the scenarios where one is preferred over other.
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