The Use of High Levels of Debt in Acquisitions Has

question 58

Multiple Choice

The use of high levels of debt in acquisitions has contributed to:

• A) the increase in above-average returns earned by acquiring firms.
• B) an increased risk of bankruptcy for acquiring firms.
• C) the confidence of the stock market in firms issuing junk bonds.
• D) an increase in investments that have long-term payoffs.

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Definitions:

Total Losses

The complete financial loss amount suffered by an entity, typically used in insurance when referring to a loss where the insured item is totally damaged or destroyed.

Security Guards

Personnel employed to protect property, assets, or people, often found in various establishments or public areas.

Substitution Effect

The change in consumption patterns due to a change in relative prices, leading consumers to substitute one good for another more or less expensive one.

Firms

Business organizations that produce goods or offer services, typically with the aim of generating profit.