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A review of two decades of research shows that debt financing has a far lower payoff than many chief financial officers (CFOs) believe. CFOs determine a sensible debt policy that is in line with corporate strategy by following a recommended policy that considers: a company's particular financing needs; the lending criteria of target sources of capital; the implications of debt policy on strategy, competition, and shareholders; and the ease of implementation. Each CFO should determine the limit of debt's payoffs to the company and should recognize what conditions might push him or her to exceed that limit. Formulation of a solid plan ensures a steady flow of capital and secures top management's commitment to such a plan.

Formal guidelines help companies identify and screen acquisition candidates. Two examples illustrate how the process of developing acquisition guidelines differs in focus and content between related diversifications and unrelated diversifications. In both cases, acquisition guidelines relate closely to corporate strategy. The screening process also provides a critical analysis of differences of opinion and improves the consistency between corporate objectives and resources. The procedure's final step involves comparing the candidate's potential for value creation to the cost of the acquisition as well as to the company's other investment opportunities.

A company should acquire another business only when the skills and resources of the two businesses can produce an income, or reduction in the variability of income, greater than what can be realized from a portfolio investment in the two businesses. Seven common misconceptions illustrate fallacies about diversification through acquisition. Acquisition-minded companies may use a set of seven suggested methods to obtain returns greater than those obtainable from simple portfolio diversification.