Reference no: EM13284088

Interest rates fluctuate in the economy over various cycles. When interest rates are low, organizations may decide to issue debt as the cost of debt is low. However, this is likely to happen only with financially strong organizations because interest rates tend to be lower during recessions. An organization that has poor cash flow prospects, limited fixed assets, or both, is unlikely to issue debt. This organization is more likely to issue equity, if it is able to find investors interested in buying the stock. Some organizations choose to have debt in their capital structures whereas others choose not to. What are the advantages and disadvantages of employing debt in an organization's capital structure? Justify your answer using examples and reasoning. Comment on the postings of at least two peers and indicate whether you agree or disagree with their views.