Effects of Debts
Posted on January 22, 2008
Filed Under Uncategorized
There are many plus and minus points to write about debts. Debts allow individuals and companies to do things that otherwise they will never able to do. In today’s world all over, people normally purchase house, cars and many other essentials which are very expensive and do not have that amount available with them. Debt is also used by Companies in many ways to leverage the investment made in their assets and, thereby, levering the return on their equity. This aspect of everage , the proportion of debt to equity , is most important to determine the risk involvement in an investment since it is riskier to have more debt per equity. This increased risk both for individuals and companies , can lead to poor results, as the cost of meeting the debt repayments et al may grow beyond the ability to pay off.
Some people argue against debt on a personal, social, corporate and government level. Even certain religions forbid lending with interest like Islam while the Catholic Church only in 1822 lifted the ban on debt and States of Torah rules that all debts should be erased every 7 years time. Since debts increase through time, it is necessary that debt must be repaid faster than its growth through interest.
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