Introduction a Financing decisions become irrelevant as long as equity holders are happy with their returns a firm can be highly levered yet no one is concerned as long as dividends are acceptable Problems arise when returns arent enough to cover debt commitments and dividends ceaseIntroduction ◼ Financing decisions become irrelevant as long as equity holders are happy with their returns. ◼ A firm can be highly levered yet no one is concerned as long as dividends are acceptable. ◼ Problems arise when returns aren’t enough to cover debt commitments and dividends cease