Simplified example: assume a public company trades at 20 times earnings. Interest rates have been close to zero for years. I'm BigCo and am valued at two billi

Simplified example: assume a public company trades at 20 times earnings. Interest rates have been close to zero for years. I'm BigCo and am valued at two billion dollars. My profits are $100m a year. ($100m x 20 = $2bn) There is a company I could buy that is complementary to my business. It's generating $20m a year in profit. The price is $140m. Spending $140m (6 times earnings) will approx. increase your market cap by $400m (20 times earnings) -- making every shareholder richer. So what do you do? You go and raise the debt and make the acquisition if you think you can run the business. Debt in itself isn't bad. It's a lever that makes good decisions great, or bad decisions horrible. It needs to be used conservatively. Most large companies should use both longer term and shorter term debt in their businesses.