As the recession of 2007-2008 loomed over both large and small businesses, many firms looked for ways to deleverage. The term deleveraging implies that:

Question

a. the firms avoided equity financing.
b. the firms bought back their own stock to reduce the stock outstanding.
c. the firms borrowed money at lower interest rates.
d. the firms replaced much of the debt in their capital structure with equity.

Answer 1

The term deleveraging implies that:

d. the firms replaced much of the debt in their capital structure with equity.

Deleveraging generally refers to the process where businesses reduce their overall debt levels, often by paying down existing debt or increasing equity financing to improve their balance sheets.