The March 27, 2007, edition of the Wall Street Journal has an article by Serena Ng and Karen Richardson titled “How Borrowing Yields Dividends at Many Firms.”
Instructions
Read the article and answer the following questions.
(a) According to the authors of the article, what factors led Scotts Miracle-Gro to decide to take on more debt?
(b) Describe the steps that Scotts took to increase its reliance on debt.
(c) What are the potential benefits of increasing leverage, as discussed in the chapter and in this article?
(d) What are the potential pitfalls of increasing reliance on debt?
(e) What other motivation might a company’s management have for taking on additional debt?