The word debt is always associated with negative things, but actually not all debt is bad, debt is often used to increase company capital or meet operational costs.
So the function of debt in business is meant as leverage, especially to finance productive purposes which can make bigger profits in the future and also the interest expense on debt will reduce income tax.
Business people taking on debt, of course, have carefully considered it, such as the reward/risk ratio. If the debt to equity ratio is less than 1.0, it is still safe for the company and shareholders. So businessmen must master the skills of how to manage debt. Are as follows:
1. Make a Plan
Before making a debt, a businessman must make a detailed and clear plan for what purpose the debt funds will be used.
2. Create a Requirement List.
Make a detailed list of needs for each post, you also need to prepare a budget for financing the use of debt funds.
2. Adjust to Needs
Make a list of needs and financing budget in detail.
Make debt the last resort for project financing.
3. Ability to Pay
Make sure your business finances are healthy, and only borrow money that you can pay off at a later date. Use the calculation of the Debt ratio or Debt to equity ratio.
4. Focus on Debt Goals
The purpose of using debt funds is only to focus on the original plan or original purpose of the debt, not to allocate it to other posts or projects.
5. Pay on time
Don't always delay, always pay debts on time. Lateness will result in fines and additional interest.
So the function of debt in business is meant as leverage, especially to finance productive purposes which can make bigger profits in the future and also the interest expense on debt will reduce income tax.
Business people taking on debt, of course, have carefully considered it, such as the reward/risk ratio. If the debt to equity ratio is less than 1.0, it is still safe for the company and shareholders. So businessmen must master the skills of how to manage debt. Are as follows:
1. Make a Plan
Before making a debt, a businessman must make a detailed and clear plan for what purpose the debt funds will be used.
2. Create a Requirement List.
Make a detailed list of needs for each post, you also need to prepare a budget for financing the use of debt funds.
2. Adjust to Needs
Make a list of needs and financing budget in detail.
Make debt the last resort for project financing.
3. Ability to Pay
Make sure your business finances are healthy, and only borrow money that you can pay off at a later date. Use the calculation of the Debt ratio or Debt to equity ratio.
4. Focus on Debt Goals
The purpose of using debt funds is only to focus on the original plan or original purpose of the debt, not to allocate it to other posts or projects.
5. Pay on time
Don't always delay, always pay debts on time. Lateness will result in fines and additional interest.
