When might high debt levels be a benefit to an organization?
A) When trying to make otherwise unaffordable investments
B) When trying to prevent a leveraged buyout
C) When determining earnings per share on common stock
D) When calculating the current ratio to determine short-term solvency
E) When the firm's short run credit risk is strong
Answer: A
Explanation: A) Borrowing funds gives a firm leverage, the ability to make otherwise unaffordable investments. In leveraged buyouts, firms have willingly taken on sometimes huge debts to buy out other companies.
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