Quote Originally Posted by Husar View Post
Well, if they'd skip one cycle of financing, they could use all that profit for financing and wouldn't have to pay any interests.
This a very conservative method. By doing this, the companies has no reserve resources to capitalize on any investment opportunity that may appear. Not to mention that the tax shield effect (you can write a certain amount of interest off of your taxes) and capitalization of interest making constant financing a good thing. However, it needs to be balanced. Too much financing can lead to bankruptcy.
That way they would have more money for financing, unless you are saying that they only use the profits to pay the interest on their loans while taking up ever more loans in which case it's no wonder the industry is in big trouble if you ask me.
What? Read above as to what I meant.