1. Increased Financial Risk: High levels of debt increase the financial risk of a company. If the investments do not yield the expected returns, the company may struggle to meet its debt obligations, leading to potential bankruptcy. 2. Interest Rate Risk: Fluctuations in interest rates can impact the cost of borrowing. An increase in interest rates can lead to higher interest payments, which may strain the company's finances. 3. Reduced Flexibility: High debt levels can reduce a company's financial flexibility. The firm may find it challenging to obtain additional financing if needed, limiting its ability to respond to opportunities or challenges.