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Common financial indicators used to identify excessive debt financing and potential thin capitalisation risk.
Common financial indicators used to identify excessive debt financing and potential thin capitalisation risk.
A company with significantly higher debt compared to equity may indicate excessive reliance on borrowing.
Large interest payments relative to earnings may indicate earnings stripping activities.
Consistently low taxable income despite strong business operations may signal profit shifting practices.
Loans between related companies are commonly examined in thin capitalisation assessments.
References: OECD BEPS Action 4 Report (2015); Buettner et al. (2012).
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