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firms that are highly leveraged

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How do you explain the existence and success of firms that are highly leveraged? In fact, some have a capital structure that is 100% debt?

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Solution Summary

The expert explains the existence and success of firms that are highly leveraged, even 100% debt. A reference is provided.

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Highly leverages firms operate in a very risky environment or in other words, high risk high return scenario. As long as they enjoy sufficient cash inflow from growing sales to meet their interest rate and debt repayment obligations, such firms enjoy leverage provided by the high debt in their balance sheets. However, such firms are also ...

Solution provided by:
Sheetal Jain, PGDM
Education
  • BComm, University of Delhi
  • Post Graduate Diploma in Management (Equivalent to MBA), All India Management Association
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