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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: benwood who wrote (88108)	10/9/2008 8:29:04 PM
From: dave9	1 Recommendation Respond to of 116555

It was explained to me as debt = leverage on capital. They can make maximum profit if they borrow as much as they can. And maximum profit is good. Most times I listened to that and thought history was not studied enough by business majors. Maximum debt means guarantied bankruptcy sooner or later. Since you have to pay interest on the debt you limit profit. Than the experts made up some earnings formula ebitd or something for companies profit if they did not pay interest. What profit? Some companies all they can do is pay interest payment.

To: benwood who wrote (88108)	10/9/2008 9:40:01 PM
From: roguedolphin	Respond to of 116555

<<"Very flawed model. The more successful a business is, the more they owe.">> After perusing the HUMONGOUS 52 week new lows list.....noticed a few big names like John Deere and Caterpillar. Took a look at their balance sheet and said "holy Sh$T!!" out loud..... ......looks like the bondholders may end up owning those companies in a severe contraction. Why so much debt on the balance sheet? No wonder "equities" are falling apart. Stockholders are at BIG RISK in this super-leveraged economy that is unraveling worldwide!