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Is there such a thing as good debt?
There is always an additional cost to incurring debt. When is it preferable to take on debt?
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Yes, debt can be beneficial as part of an organization's finance structure. The simplest example of how debt can be beneficial is to look at risk and return factors. If you can borrow from a lender at 5.5% for 36 months, to fund a venture that has a risk-adjusted return of 8.5% over that same period, debt can be beneficial. Interest payments are also tax deductible for businesses which should also be a consideration. Organizations generally use a combination of both debt and equity in their capital structures, and provided again that risk adjusted returns are considered, and the firms's capital structure is matched to operating cash flow patterns, industry trends and forecasts, debt can be a good thing.
Or....why not invest in debt securities as opposed to having negative balance!!!
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