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People misunderstand corporate debt because they analogize it to household debt but the analogy doesn't work because most household spending is consumption wher
by shalmanese 9y ago
People misunderstand corporate debt because they analogize it to household debt but the analogy doesn't work because most household spending is consumption whereas most business spending is investment.
When a business makes $1 of profit, it's that business saying "we couldn't find a single project across our entire organization that we believe would have given us a higher expected return than that dollar sitting in a bank account."
- adamlett 9y agoThat's oversimplified. Expected return is not the only factor to consider when deciding whether to invest or not. There is also risk to consider. A 51% chance to to either double up or lose your investment has a positive expected return, but if losing could mean catastrophe, it would be foolish to make that investment.