When might high debt levels be a benefit to an organization?
A) When trying to make otherwise unaffordable investments
B) When trying to prevent a leveraged buyout
C) When determining earnings per share on common stock
D) When calculating the current ratio to determine short-term solvency
E) When the firm's short run credit risk is strong

Question

Quizplus · Accepted Answer

High debt levels can be beneficial when the organization wants to make investments that would otherwise be unaffordable. Borrowing funds allows the company to finance these investments and potentially generate higher returns in the future. However, it is important to carefully consider the potential risks and costs associated with high debt levels.

When Might High Debt Levels Be a Benefit to an Organization