Fin/419 week 4 discussion question 1

Hi, Class,

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Speaking of leverage, shareholders tend to watch the financial statements and other public information closely. ; If the level of debt gets too large for their comfort, they may decide to sell their shares. ; This is particularly true of institutional investors, who have their own analysts looking at the companies all the time. ; So, there is a certain level of debt a company can carry before the shareholders start to worry too much. ; Remember, if a company is dissolved, the debt holders get paid before the equity holders, if there is anything left for the equity holder.