As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for ways to deleverage. The term "deleveraging" implies that the firms:
A)avoided equity financing.
B)borrowed money at lower interest rates.
C)bought back their own stock to reduce the stock outstanding.
D)replaced much of the debt in their capital structure with equity.

Question

Quizplus · Accepted Answer

Deleveraging means reducing debt in the capital structure. Option D states that firms replaced much of the debt in their capital structure with equity, which is the correct explanation of deleveraging. Option A means avoiding equity financing, which doesn't necessarily reduce debt. Option B says borrowing at lower rates, which may reduce cost but not necessarily debt. Option C mentions stock buyback, which doesn't reduce debt directly. So, option D is the best choice.

As the Recession of 2007-2008 Loomed Over Both Large and Small