Why can't debt financing be used in excess?

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1138121

2026-05-20 17:31

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Debt financing cannot be used in excess because it increases a company's financial risk and obligation to repay, which can strain cash flow and lead to potential insolvency. High levels of debt can also negatively impact a company's credit rating, making future borrowing more expensive or difficult. Additionally, excessive debt can limit a company's ability to invest in growth opportunities and may lead to loss of investor confidence.

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