All of the uses of funds listed above, under the right circumstances, are good reasons to borrow money and bankers regularly lend money for all of them. However, it is important to identify the need so that you can properly focus your credit analysis. The key is for assets to be converted to cash. If inventory is sold under normal credit terms, a receivable is created. Only when that receivable is collected does cash come into the company that may be used for debt repayment.
Few companies see sale of assets as a primary source of debt repayment.
Companies do not generally sell division or large amounts of fixed assets in the ordinary course of business. In addition, while companies regularly collect accounts receivable, this cash is generally used to fund new accounts receivable. New debt or equity. Many companies have a target level of debt as a permanent part of their capital structures. These companies use new debt issues to repay maturing debt.