A firm that takes on too much debt could experience problems repaying its lenders or meeting promises made to stockholders.

Question

Quizplus · Accepted Answer

When a firm takes on too much debt, it becomes highly leveraged and the interest and principal payments on that debt can become unsustainable. This can lead to difficulties in repaying lenders and meeting promises made to stockholders, such as paying dividends or buying back shares. Therefore, taking on too much debt can be risky for a company.

A Firm That Takes on Too Much Debt Could Experience