> What I don't get is why we prefer to pay debts and especially interests when we could just take the debts and cancel them out where possible.
Working capital.
Perhaps you borrowed $100,000 and are obliged to pay that back at 10% interest. If you happen to have $100,000 in your pocket, perhaps you're better off using that $100,000 to generate additional revenue, which would hopefully show a better return that 10%, thus effectively covering the 10% interest on the loan and a small profit margin.
If you used the $100k cash to pay off the $100k loan you'd have no working capital, which would likely stymy cashflow and hamper further growth.
That's the theory anyway. You need money to make money and the one way to obtain money is borrowing.
If you cancelled out the cyclical/reciprocal debts then you'd still have the same amount of working capital as you'd pay back $X but also get $X back as a creditor.
Working capital.
Perhaps you borrowed $100,000 and are obliged to pay that back at 10% interest. If you happen to have $100,000 in your pocket, perhaps you're better off using that $100,000 to generate additional revenue, which would hopefully show a better return that 10%, thus effectively covering the 10% interest on the loan and a small profit margin.
If you used the $100k cash to pay off the $100k loan you'd have no working capital, which would likely stymy cashflow and hamper further growth.
That's the theory anyway. You need money to make money and the one way to obtain money is borrowing.