key term - Principal

Definition

In the context of raising long-term financing, principal refers to the original amount of money borrowed or invested, before any interest or profits are added. It is the base figure on which interest payments and returns on investment are calculated.

Related terms

Interest: The cost of borrowing money or the return earned on an investment, typically expressed as a percentage of the principal.

Bond: A type of fixed-income security where an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period at a variable or fixed interest rate.

Amortization:

The process of paying off debt with a fixed repayment schedule in regular installments over time, which includes both interest and principal amounts