Heavy use of long-term debt will allow a firm to carry less liquid,more profitable assets.

Question

Quizplus · Accepted Answer

Heavy use of long-term debt allows a firm to finance its operations with borrowed funds instead of equity, which can be more expensive. This allows the firm to invest in less liquid, more profitable assets that may generate higher returns over time. However, this also increases the firm's financial risk as it must make regular payments on its debt obligations even during periods of low profitability.

Heavy Use of Long-Term Debt Will Allow a Firm to Carry