3 ms·

Companies take debt to optimise tax.

• edwinyzh 12y ago
  Well, I need to ask what does this mean, I appreciate it if anybody can explain in with an example :)
  • mynegation 12y ago
    The better wikipedia article would be http://en.wikipedia.org/wiki/Tax_shield http://en.wikipedia.org/wiki/Tax_shield Debt itself (as a liability) is definitely not deducted from profit, but repayment of debt is deducted from the profit, and - what is more important - interest on debt is deducted from the tax base as a result. Which means that if you can load up on debt to get higher return, than you would get investing your own money.
• denis1 12y ago
  @edwinyzh as I understand it, basically you deduct the debt from the profit and pay taxes only for the remaining amount. Wikipedia has a very short article on this [1]. [1]: https://en.wikipedia.org/wiki/Tax_benefits_of_debt https://en.wikipedia.org/wiki/Tax_benefits_of_debt