Bombadier Industries manufactures aircraft-related electronic devices. Bombadier borrows heavily to finance operations. Often Bombadier is profitable because it can earn operating income much higher than its interest expense. However, when the business cycle has turned down, the company's debt burden has pushed the company to the brink of bankruptcy. Operating income is sometimes less than interest expense.
Respond to the following questions and, if appropriate, include personal experience as part of your answers.
- Is it unethical for managers to saddle a company with a high level of debt? Or is this practice just risky?
- Who can get hurt when a company takes on too much debt?