Describe the potential impact associated with getting rid of debt for a medium-sized company that was using twenty percent of their profit to pay down debt. In what ways would you rather see the money used?

 

Using 20% of Profit to Pay down a debt for a small sized Medium business might be a good or bad thing defending to the net effect to the business as a whole considering opportunity cost.

The money might be used as an additional capital for the business in order to earn more, it might be also put into an investment account. The choice whether to put into additional capital/investment or to pay down the debt would be defending on the weight of interest being paid for the debt and the benefits on putting to additional capital/Investment.

If the interest expense is higher, it is better to be paid off. But if the additional Earnings would be higher to the interest expense being paid for the debt, it is better to use the money for additional capital/Investment.