All our lives we have been warned of having too much debt, both consumer and business,...

All our lives we have been warned of having too much debt, both consumer and business, which can lead to insolvency and bankruptcy. Explain the proper use of debt, including any limitations, for the consumer (family) and for a business.

Expert Solution

We should consider the debt factor bery seriously because the excess use of debt funds will leads to many problems which will affect our financial stability. Actually debt funds are motivation to spend more but we have to repay it. Here the problems comes. If we can not repay the debt back then it will leads to insolvency or bankruptcy. So proper use of debt funds is verymuch essential, and without proper usage there will be many consequences. Actually it take our future money and here the cost will be higher.

Debt can be good debt or bad debt. Good debt will provide more value to the business and for a consumer ad well as. Here the use of debt fund will be perfect and no extraspending is made. Actually the reason behind this debt borrowing should be genuine and acceptable. Which means we should always try to avoid taking debt funds for in appropriate things. So the usgae should be perfect. Student loans are good example of perfect debt borrowing. Here the need is very essential and verymuch important. Before taking debt we should consider the interest rate amd terms of debt. This will also affects our repayment. Then we need to calculate whether it is needed or not. If we are taking debt for some short term purpose and it csn not generate a proper income throughout thenit can be considered as bad debt. So here the limitation comes. That we should understand whether it is a good debt or bad debt. By looking that we can make proper debt allocation.

ThankYou.....

jeff jeffy answered 1 year ago

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