As CEO of Wealth Stack, a company specializing in helping veteran business owners build an optimal capital structure and access the right kind of capital, I see CEOs and CFOs increasing their debt ratios without rhyme or reason.
As part of my one-on-one with select CEOs, I often outline a series of questions that can help business owners determine how much debt they should take on. Typically, this looks like asking yourself, “Do we have enough insight into our tax situation to be confident about the after-tax cost of debt? What are our strategic goals, and how might debt constrain our ability to achieve them? How much debt can we comfortably service without putting strain on our cash flow?”