International Business Debts and international business

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Some years ago it seemed that international business was all about making debts. When the interests of the debts are lower than the profits the money of the debts offer it seems good management to use the money of somebody else to increase the profits. The bad part of making debts is that debts are risky. In usually situations the debts have to be paid back. And if business is bad it might become a problem to pay back the debts. This can result in a situation that the company becomes dependent of the banks. If costs are paid from saved money, earnt by the company with its own activities, the company faces losses if the business goes bad. But the company doesn't get into trouble with the banks. And the company stays independent.

 

Doing business with money from loans seems interesting and profitable. That is probably the reason why loads of companies have made debts. With a small amount of own money it is possible to make big profits by using debts like a financial tool. And there was and is a huge admiration for managers who manage to get loads of profits for the people who invest in their company, the stake holders and the owners of the company. The financial risks of debts seem to be forgotten.

 

The results are like the play of the little stones, that throw down eachother when the first 1 starts to fall down. Because in the system lots of companies and banks are dependent of eachother the fall of the first one results in the downfall of a lot of other companies and banks. So this means that the financial and economical system of international business is not stable. For the short term big profits are reachable. In the long term big losses are made too.

 

This results in the idea, that it can be important to give more attention to the opinion, that debts are risky.