Chapter 4
Financing with Debt
IN THIS CHAPTER
Checking out how debt works
Recognizing when debt is a good option
Exploring your lender options
Wrangling some cash from other sources
When discussing the concept of debt in today’s economy, a very serious and unfortunate misconception needs to be clarified. That is, contrary to popular belief, the term debt isn’t a bad word.
If you remember one concept from this chapter, it should be this: Debt is most appropriately used to generate value greater than the repayment amount. Whether the asset acquired via debt funding is tangible (such as equipment used in a manufacturing process), paper-based (such as a trade accounts receivable in which a valid claim is present against a third party), or centered on the ability to reliably predict a positive cash-flow stream, the business must have a clearly identifiable goal for using debt that can be validated by an independent third party.
This chapter explores the pros and cons of debt, providing an overview of its key attributes and characteristics.
Understanding the Basics of Debt Capital
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