Some researchers have argued that the existence of free cash flow can lead managers in a firm to make inappropriate acquisition decisions. To avoid these problems, these authors have argued that firms...

Some researchers have argued that the existence of free cash flow can lead managers in a firm to make inappropriate acquisition decisions. To avoid these problems, these authors have argued that firms should increase their debt-to-equity ratio and “soak up” free cash flow through interest and principal payments. Is free cash flow a significant problem for many firms?