Large amounts of high interest debt on a company's balance sheet signal an ability to take advantage of profitable investment opportunities when they arise because the borrowed funds are available for use by management.

Question

Quizplus · Accepted Answer

Large amounts of high interest debt on a company's balance sheet can actually signal financial risk and limit a company's ability to take advantage of investment opportunities. This is because a significant portion of the company's cash flow will be required to service the debt, leaving less funds available for other uses such as investments or emergencies.

Large Amounts of High Interest Debt on a Company's Balance