Debt is always bad

Definition: Moderate leverage can enhance returns on equity (financial leverage effect) and provide a tax shield (interest is deductible). An optimal capital s…

Reality

Moderate leverage can enhance returns on equity (financial leverage effect) and provide a tax shield (interest is deductible). An optimal capital structure balances the tax benefits and financial flexibility of debt against the costs of financial distress.

Why It MattersUnderstanding why "debt is always bad" is a misconception helps avoid analytical errors and improper financial decision-making.
CategoryCapital Structure

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