What is debt? Differences between borrowings and growth for beginners

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Debt

Money that needs to be repayment in the future

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In general, there is an image of debt, but it is important to distinguish negative debts for bad debt and growth in investment and corporate analysis.

For example, companies may use工場abilities to increase future profits such as factory construction, new business, M&A.

In this article, we will explain the basics of debt, how to look at corporate analysis, and the points that beginners should be aware of.

What is debt?

Debt is the obligation to pay the repayment obligations or the future.

In corporate accounting, it is listed on the balance sheet.

The balance sheet is a material that indicates the company's property and debt state.

Well called "BS".

Example of debt

Debt is also a company.

Individual Debt

Corporate Debt

In the case of a company, debt is a means of financing to move business.

Debt Icall Not Bad

This is important.

Debt is not always bad.

Companies may use borrowings for the following purposes:

• Construction of new plant
• AI Investment
• Store expansion
• Development of logistics network
• M&A

In other words, there are abilities to increase future profits.

In this case, abilities become tools for growth investment.

What is a bad debt?

On the other hand, there are dangerous debts.

H dous Case

If only企業のabilities are affected without profit, corporate finance will worsen.

In particular, companies that continue to fill deficits with borrowings need to be careful.

Debt Ratio Important in Corporate Analysis

In investment, you need to see how many debts you can repay.

Typical indicators are:

• Capital ratio
• D/E Ratio
• Interest-bearing debt
• Cash Flow

By looking at these, we can see the company’s financial safety.

What is the capital ratio?

The ity ratio is an indicator of how much of the total assets are funded in advance.

The calculation formula is:

ity ratio = ity ÷ Total assets × 100

In general, the higher the capital ratio, the higher the financial stability.

However, the appropriate level varies depending on the industry.

What is D/E Ratio?

D/E ratio is an indicator of how much interest-bearing debt exists for 、ity.

D/E Ratio = Interest-bearing debt ÷ Capital

The higher the D/E ratio, the higher the borrowing dependency.

On the other hand, it may be temporarily higher for growth investment.

What is interest-bearing debt?

Interest-bearing debts are debts that need to pay interest.

Here are some examples:

• Bank loan
• Corporate Bonds
• Commercial Paper

It is different from the payment obligations that occur in normal commerce, such as the.

Investors are important to check whether interest-bearing debt is too high.

There are many業界abilities

The number of業界abilities depends on the industry.

For example, the following industries are likely to have業界abilities:

つまり、

Im ate risk as there are many abilities

Not available.

It is important to compare with other companies in the same industry.

Points to note for investment beginners

See sales only

Even if sales increase, abilities may increase rapidly.

Find out if your loan is not dependent on your sales growth.

See only rapid growth

Fast growth companies look attractive.

However, if the borrower is forced to expand, it will be hard to grow.

You need to see not only sales growth but also profit and cash flow.

I re Cash Shorts

There are companies that lack cash even in black letters.

If the profit does not come out, the receivable may be delayed or if the inventory increases, the receivable may be shortened.

In investment, it is an indicator that you want to check the sales cash flow.

There are good debts and bad debts in households

There are good debts and bad debts for individual households.

Example of Good Debt

• Education
• Un onable m gage
• Self-investment leading to revenue growth

Example of Bad Debt

• Revo payment
• Loans for waste
• High interest rate loan

High interest-bearing debts are particularly prone to the formation of assets.

It may be a priority to reduce high interest rates before starting investment.

Repayment capability is important in investment

It’s not just the amount of debt that is important for both companies and individuals.

The ability to repay is really worth seeing.

Specifically, check the following points:

• Is it profitable?
• Is sales cash flow stable?
• Is there too much interest burden?
• Is the repayment period not concentrated?

Debt is a tool for growth if you use it within the range that you can return.

However, if you exceed the repayment capacity, it will be a big risk.

• Debt repayment obligations
• Debt Icall Not Bad
• Debt for growth investment
• Dangerous Debt
• View profits, cash and repayment capabilities

Let’s start with the following three things:

1. View Capital Ratio
2. the purpose of borrowing
3. Analyze profit and cash flow with a set

Debt is an important point for corporate analysis.

The accuracy of investment decisions increases by seeing not only how much you are borrowing, but also what you are borrowing and what you can return.

Concept

Debt is not bad, but it is used to tell you that it is also a risk for growth investment.

Text

• Main: What is debt?
• Sub: Good debt and bad debt

Color

• Red
• Blue White

Contrast risk and growth

構成

• Left: borrow image
• Central: Libra Right: Growth graph