The use of high levels of debt in acquisitions has contributed to:
A) the increase in above-average returns earned by acquiring firms.
B) an increased risk of bankruptcy for acquiring firms.
C) the confidence of the stock market in firms issuing junk bonds.
D) an increase in investments that have long-term payoffs.

Question

Quizplus · Accepted Answer

High levels of debt increase financial risk, which can lead to a higher likelihood of bankruptcy for acquiring firms if they are unable to meet their debt obligations.

The Use of High Levels of Debt in Acquisitions Has