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.
C) the negative returns earned by both firms.
D) an increase in investments that have long-term payoffs and reduced firm competitiveness.

Question

Quizplus · Accepted Answer

The use of high levels of debt in acquisitions increases the financial risk of the acquiring firm, which can lead to bankruptcy if they are unable to make payments on the debt.

The Use of High Levels of Debt in Acquisitions Has