- Apr 19, 2007
- Reaction score
- Gulf Coast of South Texas
That was never the argument. I was disputing what Warren was saying and the manner in which he was trying to justify using debt.So correct me if I am wrong. Owned money has already been taxed, that what makes it under your control. Now back to the argument of debt vs owned money. If an operating note is 9% and your tax rate is anywhere from 10-30% depending on how much money you made there is a cost to having both. Big businesses aim for an optimal debt to equity ratio based on the cost of debt, the return on equity they want, and other variables. Should we as cattle owners not find out what our optimal debt to equity ratio is?
I know some of you don't care as much about maximum efficiency as you do being debt free and that's fine for your operation. But for the sake of educational discussion it would be nice to see something other than "debt is risky" and "you'll go broke with debt on cows" from the debt free crowd. Besides, I am young so a small amount of risk doesn't bother me. If every asset I hold(owned by me and the bank) evaporated tomorrow I could pay all my debt off in a few years working at McDonalds. So why not use a reasonable amount of debt to help speed up the growth process?
The OPM term has been bent and thrown around to justify poor choices for debt and as a way to sound sophisticated.