Thin Capitalization
Thin capitalization occurs when a company is financed with a high proportion of debt relative to equity. Thin capitalization can impact tax strategies, leverage, and the risk profile of portfolio companies. Understanding the implications of thin capitalization is critical for structuring deals and managing the financial health of investments.
Key Takeaways
- High debt relative to equity.
- Impacts tax and investment strategies.
- Affects leverage and risk profiles.
- Important for structuring deals.
