--%>

Why too little debt is as unwanted as is too much debt

If an optimal capital structure exists, describe reasons why too little debt is as unwanted as is too much debt?
Too little debt may be as unwanted as too much debt since if a firm contains a very conservative capital structures it may be losing the chance to reap the positive benefits of financial leverage. A company along with a bright future is probably not maximizing shareholder wealth if it contains a very small amount of debt in its capital structure. A more aggressive capital structure may build up more value for the owners.

   Related Questions in Finance Basics

  • Q : Assignments i want to write final state

    i want to write final state report. My state is Texas.

  • Q : Equilibrium level of aggregate

    Normal 0 false false

  • Q : Primary requirement for JIT inventory

    Describe the primary requirements for a successful JIT inventory control system? For a JIT system to be successful the supplier has to be willing and capable to deliver materials immediately and the quality of delivered materials has to be high.

  • Q : Define Grants Grants : It is generally

    Grants: It is generally used to explain amounts of money received by an organization for a particular purpose however with no obligation to repay (that is, in contrast to a loan, though the award might stipulate the repayment of funds under some situa

  • Q : Why riskiness of portfolios is

    Normal 0 false false

  • Q : Explain the primary advantage of

    Explain the primary advantage to a corporation of investing some of its funds within working capital? Through investing in working capital a firm gets the liquidity it require helping it to pay its bills. Therefore the risk of the firm is reduce

  • Q : Underwriting a new security issue for

    What does an investment banker do while underwriting a new security issue for any corporation? While underwriting a new security issue an investment banker purchase it and after that resells it to investors.

  • Q : Define Fiscal Impact Analysis Fiscal

    Fiscal Impact Analysis: Usually refers to a section of an analysis (example, bill analysis) which recognizes the costs and revenue impact of a proposal and, to the level possible, a particular numeric estimate for appropriate fiscal years.

  • Q : Advantages of corporation in countries

    Describe some primary advantages while a corporation has operations in countries other than its home country? Explain risks? Foreign operations may decrease a company's labour or material costs, and may raise its sales. Risks comprise possible

  • Q : Mascot Simulation Simulation with

    Simulation with Crystal Ball Provided Workbook: Mascot Simulation Relevant Readings:"Discounted Cash Flow Modeling" folder + Text