Why should a company analyze its costs and profits to determine the appropriate amount of debt to accept?
When a company borrows (i.e. increase its debt), it faces two immediate problems. 1) Is the company generating enough profit to return the loan, and 2) will the loan be returned quickly enough so that the company does not have to pay too much interest.
The crucial number to answer both questions is how much the company is making, and a company needs ...