Principal definition
/What is Principal in Finance?
Principal is the amount of a debt that was originally borrowed, and which remains unpaid. This amount does not include any accumulated unpaid interest associated with the debt.
What is Principal in a Contract?
In contract law, the principal is a person or entity who authorizes another party (an agent) to act on their behalf in a legal or business transaction. The principal is typically the main party in an agreement and holds primary responsibility for fulfilling contractual obligations.
What is Principal in a Trust?
Principal can also refer to the property held by a trust. It is not the income generated by that property.
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How is Principal Different from Equity?
Principal represents the original funds borrowed or invested, such as the outstanding balance on a loan or the face value of a bond. Equity, on the other hand, represents ownership interest in a company, calculated as assets minus liabilities. While principal reflects an obligation or an amount at risk, equity reflects residual value and ownership rights in the business.