Leverage can be the least expensive form of capital

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It is noted that initially, leverage can be the least expensive form of capital. However, if potential lenders feel a firm is overly leveraged, they may charge a punitive rate, or refuse to lend all together. This can be disastrous if a firm needs to refinance maturing debt. Unfortunately, the perception of what amount of leverage is excessive changes. What may seem like a reasonable amount of leverage today may be viewed as excessive tomorrow. If you were the CFO of an organization, what strategies would you employ to keep the cost of capital as low as possible while simultaneously minimizing the risk that the organization will be have difficulty refinancing debt in tight credit conditions.

Reference no: EM13724292

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