Answered: an you think of certain types of…

an you think of certain types of businesses/industries wherein a high amount of debt is typical and considered acceptable

SWFT Comprehensive Vol 2020

43rd Edition

ISBN:9780357391723

Author:Maloney

Publisher:Maloney

Chapter7: Deductions And Losses: Certain Business Expenses And Losses

Section: Chapter Questions

Problem 4DQ

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Think of businesses/industries wherein a high amount of debt is typical and considered acceptable
It can be true that for one industry, a certain level of debt is acceptable, but for another, it can be very risky. Are there any types of businesses where a high level of debt is the usual case and common among the firms in that industry?
What are the different ways to estimate bad debt? How does this affect net income? What does Generally Accepted Accounting Principles (GAAP) require? Why? Should all companies have bad debt? Explain your answer.
Discuss the factors that a Company should consider when choosing a source of debt finance and the factors that may be considered by providers of finance in deciding how much to lend to the company.
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Explain how continuous reliance on debt financing will affect the return to the equity holders or shareholders of your company following the arguments of M&M proposition 2
What are the sign that a company debt is high?
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