- A company is said to be overwhelmed when it has too much debt, hindering its ability to pay principal and interest, and cover operating expenses.
- Excessive debt usually leads to a downward financial spiral, resulting in the need to borrow more.
- Companies usually restructure their debt or declare bankruptcy to deal with overleveraging.
- Leverage can be measured using debt to equity or debt to total assets.
- Disadvantages of overleveraging include limited growth, loss of assets, restrictions on further borrowing, and inability to attract new investors.