It’s very dangerous for a company to operate on too much debt because debts can easily lead to the death of a company. In case of a challenge in repaying the debts, the company goes under receivership or is taken over by the creditors. Secondly, debt capital is normally very expensive. The interest paid on debts eats too much into the revenues generated by the company. Finally, creditors often have their own conditions that affect the flexibility of management decisions. Lack of flexibility when it comes to managerial decisions means fast response to situations becoming impossible. In business, time makes a big difference.
Why is it bad for a company to carry too much debt?
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Academic.Tips. (2021) 'Why is it bad for a company to carry too much debt'. 8 July.
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Academic.Tips. (2021, July 8). Why is it bad for a company to carry too much debt? https://academic.tips/question/why-is-it-bad-for-a-company-to-carry-too-much-debt/
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Academic.Tips. 2021. "Why is it bad for a company to carry too much debt?" July 8, 2021. https://academic.tips/question/why-is-it-bad-for-a-company-to-carry-too-much-debt/.
1. Academic.Tips. "Why is it bad for a company to carry too much debt?" July 8, 2021. https://academic.tips/question/why-is-it-bad-for-a-company-to-carry-too-much-debt/.
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Academic.Tips. "Why is it bad for a company to carry too much debt?" July 8, 2021. https://academic.tips/question/why-is-it-bad-for-a-company-to-carry-too-much-debt/.
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"Why is it bad for a company to carry too much debt?" Academic.Tips, 8 July 2021, academic.tips/question/why-is-it-bad-for-a-company-to-carry-too-much-debt/.
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