Explain how leverage can have both positive and negative effects, and give examples as to when a company should increase debt or avoid it to finance projects.

MODULE 3

DQ1

Assessment Description

Debt tends to have a bad reputation and we are advised to try to stay out of debt. Debt or financial leverage, however, can be a good thing for a business. Explain how leverage can have both positive and negative effects, and give examples as to when a company should increase debt or avoid it to finance projects. Use the Wall Street Journal for additional research. Participate in follow-up discussion by adding additional elements or additional rationale to those of a classmate.

DQ2

Assessment Description

Briefly describe the four categories of financial ratios (liquidity, activity, profitability, and financial leverage). From an investor’s standpoint, which of these categories might be the most helpful? Explain your reasoning. Participate in follow-up discussion by critiquing your classmates’ posts and/or defending their challenges to your post.