The Wall Street Journal reported that Prada, the well-known Italian fashion house, ? planned to cut...

 

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The Wall Street Journal reported that Prada, the well-known Italian fashion house, ? planned to cut its debt levels by 385 million euros by selling assets and reducing inven- tories and with a large tax rebate from the Italian government. The company hoped to be able to raise funds by issuing equity, but the financial markets were worried that Prada's debt levels were much too high. Why would high levels of debt make it difficult to raise equity capital? How would Prada's financial statements change if it was successful with its plans? The Wall Street Journal reported that Prada, the well-known Italian fashion house, ? planned to cut its debt levels by 385 million euros by selling assets and reducing inven- tories and with a large tax rebate from the Italian government. The company hoped to be able to raise funds by issuing equity, but the financial markets were worried that Prada's debt levels were much too high. Why would high levels of debt make it difficult to raise equity capital? How would Prada's financial statements change if it was successful with its plans?

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When a company has a high level of debt is make it different and ha... View the full answer