A business is hoping to expand. If it does so at this moment, it will increase debt. Since the financial planning requires both prioritizing paying debts and financing growth, what factor should weigh the most when the business is making this decision?

Question

A business is hoping to expand. If it does so at this moment, it will increase debt. Since the financial planning requires both prioritizing paying debts and financing growth, what factor should weigh the most when the business is making this decision?

• the role that investors play in this company
• whether growth is in the company's long-term goal
• how new debt fits into the overall company finances
• the opportunities that the expanded business will create

Answer 1

When making the decision of whether to expand and increase debt, the factor that should weigh the most is how new debt fits into the overall company finances. It is crucial to assess the company's current financial standing and identify how taking on additional debt will impact the company's cash flow, profitability, and ability to meet its financial obligations. Understanding the implications of the new debt on the company's financial health will help the business make a more informed decision on whether the expansion is financially viable in the long term.