Deleveraging is the reduction of debt and the opposite of leveraging. The most direct way for an entity to deleverage is to immediately pay off any existing debts and obligations on its balance sheet. In the reading, a company can achieve deleveraging:

A. by paying down debt using proceeds from asset selling (liquidating).
B. by the significant rise of its share price.
C. by holding much bad debt to enjoy tax deductibility of interest expense.

Correct Answer: B

Deleveraging occurs if the relative percentage of a business's balance sheet funded by liabilities is lowered. The example in the textbook is "passive" (not proactive) deleveraging.