Final answer:
The borrowing component in a financial plan refers to acquiring financial capital through loans to meet immediate or future investment needs, which is paid back when financial conditions allow.
Step-by-step explanation:
The ‘borrowing’ component in a financial plan relates to the actions taken by individuals or businesses when they seek financial capital to fund immediate needs or long-term projects, with the expectation of repaying in the future when their financial situation improves. For instance, college students often borrow to cover their expenses, and after graduation, when they are employed, they repay their loans. Similarly, individuals may borrow to purchase homes or cars, and businesses might seek loans to build factories or invest in projects that won’t pay off for several years. When there is greater confidence in the ability to repay, the quantity demanded of financial capital at any given interest rate tends to increase.