An Entity Has Debt Finance That Exceeds Its Equity Finance

question 80

True/False

An entity has debt finance that exceeds its equity finance by 20%. Under the traditional 'best-practice' approach used by Australian banks and financial institutions, it would be considered that the debt finance is too high.

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Definitions:

Financial Health

Financial health is a term used to describe the state of one's personal or an organization's financial situation, including aspects of financial stability, ability to meet obligations, and the capacity to absorb shocks.

Dividend Yield

The financial ratio that shows how much a company pays out in dividends each year relative to its stock price.

Secondary Markets

Stock exchanges and over-the-counter markets where investors can trade their securities with others.