Sony to sell $1.9bn of conv bonds, stock down 10% in early trading.

[DirtyP2002]

@slimebeast

It is all about Return on equity.

If a company borrows money for an investment, the balance sheet will grow on both sides (debt + investment). The profit should increase due to the investment. So the ROE increases, but the equity will be the same. Therefore ROE increases.

As easy as it sounds there is a point when you should not use borrowed money. A company should always use equity to "secure" the parts of the company that are necessarily needed for the core business (e.g. a car manufacturer should finance the factories as secure as possible). And the return of the investment needs to be higher than the interest for the borrowed capital.