During a recession,companies with a significant portion of their capital structure in the form of debt (i.e.,high leverage) often struggle to meet their legally binding interest obligations.

Question

Quizplus · Accepted Answer

During a recession, companies with high leverage may have difficulty generating enough cash flow to meet their debt obligations, including interest payments. This can lead to financial distress and potential default on their debt. Therefore, high leverage can be a disadvantage during a recession.

During a Recession,companies with a Significant Portion of Their Capital