Debt can also increase a company's cash flows by imposing discipline on its management. A company must make regular interest and principal payments, so it has less excess cash flow for pursuing frivolous investments or acquisitions that don't create value. Although this argument has been used over the years to support the high levels of debt in leveraged buyout transactions, it has a problem: a company needs to employ very large amounts of debt to get this discipline and, therefore, such debt is only useful for companies with very stable, predictable cash flows and limited investment
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