Verizon Communications Inc.: Capital Structure Choices

(Verizon , 2009a . Verizon was also able to pay the outstanding debt of Alltel . Although , Verizon acquired a huge debt , the acquisition made Verizon the largest telecommunications company in the country ousting AT T . This represents an expansion in customers and service capability that would translate into revenue generation extending towards the long-term to allow Verizon to pay-off its debt and gain profit

4 . How large , in qualitative or quantitative terms , are the disadvantages to this company from using debt

Debt financing also involves risks . Verizon utilized cash generated from its

operations to pay off its debt , particularly its short-term debt . The company 's ability to pay off its debt lies in the expectation of continuous increases in its cash from operating activities , which is USD26 .2 million in 2008 up from USD25 .74 million in 2007 (Verizon 2009c . So far , Verizon has been able to meet its debt obligations (Verizon , 2009a . However , any downturn in cash generation would pose risks to its ability to pay off its debt . Its acquisitions that eat up most of its acquired credit may not be able to actualize the expected potential since competitors , especially AT T would respond to the competitive merger . There are also problems in managing a large organization and Verizon already faced a number of controversies with customers involving products and services leading to lawsuits and leted contracts

5 . From the qualitative trade off , does this firm look like it has too much or too little debt

By comparing the qualitative advantages and disadvantages , Verizon appears to have too little debt . Its debt financing enabled Verizon to become the largest telecommunications company in the United States . When considered on its own , this is a gargantuan achievement when considered relative to the risk involved in debt financing . To date , Verizon has a...