Debt and Bankruptcy

Is minimizing weighted average cost of capital by having a largely debt-based capital structure a high-risk strategy given the threat of bankruptcy in an over leveraged business?

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2006-03-17 20:51:29
2006-03-17 20:51:29

Yes. All of the items in your question denote a high-risk strategy. "Largely debet-based capital structure", "given the threat of bankruptcy", overleveraged business". Minimizing the weighted average cost of capitol is simply an accounting tool and is not a strategy and so has no impact on the risks involved in operating a business. Yes, try and keep that debt down.

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