Impact of additional debt to future earnings and change of management by new stakeholders
Debt will not dilute the value of shares an entity owns; however, since debt repayment continues, it significantly reduces a company’s net revenues generated and the cash flow (TIT, 2021). There is also the potential loss of the company following a breach of debt covenants. The stockholders have a massive influence on the management of the business. The stockholders elect a board of directors, and it is the body that reviews current top management. The stockholder can pressurize the board to make changes in the present composition or structure of top management or can decide to work with the existing format and individuals.