Babcock & Brown, the failed investment firm, was using a high risk business system and was deep in debt, Michael Larkin, the firm's last CEO has disclosed to an inquiry regarding the firm's fall.

In front of Sydney's federal court, Mr. Larkin recounted that Babcock's administration had strived to lessen its debt amounting to around $3 billion as the world fiscal crisis got around the corner.

He also admitted that the investment firm had a business model constituting high risks.

Babcock had a target for return-on-equity of about 25 up to 30 per cent, which, according to him, was very high.

"It had significant leverage at the project and corporate level, so in that sense it had significant leverage," Mr. Larkin disclosed on Friday.

"And to the extent people regard that as high-risk, then, yes."

Mr. Larkin was the chief financial officer of Babcock until he got appointed as CEO starting August 2008.

It was the fifth session of the court inquiry by the Babcock & Brown's liquidators.

Babcock & Brown came into administration with losses amounting to more than $5 billion in March 2009, a striking plunge from its strength in 2007 when the firm was worth more than $13 billion.

Now referred to as "mini-Macquarie", Babcock & Brown incurred heavy debts to purchase property assets and infrastructure to on-sell to other investors in the finances the firm managed for certain fees.