When Debt Is a Good Thing
Earlier this week, I discussed why investing in highly indebted companies is one sure way to sink your portfolio. As I expected, I got a flurry of emails asking me what debt levels are acceptable for various companies in various industries and if I have a certain debt percentage that I stick to.
The common mistake many investors make is looking at debt as a percentage on a balance sheet as opposed to a source of capital for a business. In other words, the indebtedness of a company should be viewed in the context of the cash flow statement. Since the use of debt capital is a financing decision, one needs to look at the cash flow statement in answering the question of whether or not debt is a good....522 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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