Question

The use of high levels of debt in acquisitions has contributed to: a. an increased risk of bankruptcy for acquiring firms. b. the increase in above-average returns earned by acquiring firms. c. an increase in investments that have long-term payoffs. d. the confidence of the stock market in firms issuing junk bonds.

Answer 1

a. an increased risk of bankruptcy for acquiring firms.

Step-by-step explanation:

When a firm acquires a business through the purchase of a company's assets using a high level of debt, the acquiring firm would generally be responsible for all the target company's debts and liabilities.

Thus, the use of high levels of debt in acquisitions will contribute to an increased risk of bankruptcy for acquiring firms.