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You are advising Aramco in Saudi Arabia. The firm is in high-growth stage and is looking at the optimal way to finance it. Looking at petroleum companies in the U.S, it concludes that a significant proportion
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You are advising Aramco in Saudi Arabia. The firm is in high-growth stage and is looking at the optimal way to finance it. Looking at petroleum companies in the U.S, it concludes that a significant proportion of capital should come from debt. Is this conclusion justified? Why and why not?

User Mmilleruva
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Answer:

No the conclusion is not justified

Step-by-step explanation:

The decision is not justified and this because , Aramco stage in business ( High-growth stage ) will most likely be different from that of the petroleum firms in the US. This might be due to tax advantage of debt for firms in US which might be absent in Saudi Arabia. also the cost of finding Oil in the US might be higher when compared to the cost of finding Oil in Saudi Arabia

Hence the decision is not justified

User Nickspoon
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