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Taking on debt you don't need is a fundamental failure of personal responsibility
by flangola7 3y ago
Taking on debt you don't need is a fundamental failure of personal responsibility
- WJW 3y agoFor an individual, perhaps. Even there some exceptions can be found though: taking on a mortgage to buy a house can be the right decision even though you could keep on renting and don't technically need to take on the debt. For a business it gets much muddier: do they "need" to take on debt if it makes them more competitive in the market? A company with a well optimized capital structure containing both debt and equity can be much more profitable than a company without, and can use those extra profits to out-compete companies that are less efficient.
- JackFr 3y agoAs long as corporate finance has existed, the fundamental question, indeed the only question is what is the optimal capital structure for the firm.