What essential elements should an entity's debt policy include?

An entity's debt policy must comprehensively address how debt will be managed throughout its lifecycle, making the inclusion of the debt issuance process, managing the debt portfolio, and guidelines for structuring crucial. These components establish a clear framework for issuing new debt, ensuring that the entity maintains an appropriate debt level in relation to its financial goals and obligations.

The debt issuance process outlines the steps and considerations taken when raising funds, allowing for a systematic and informed approach to borrowing. Managing the debt portfolio involves actively overseeing existing debt to optimize interest costs, refinance when advantageous, and ensure repayment obligations align with the entity's cash flow capabilities. Guidelines for structuring debt provide parameters for how debt should be configured—such as interest rates, maturity, and payment terms—to align with the entity's financial strategy and risk tolerance.

Each of these elements is essential in fostering long-term financial stability and operational efficiency, enabling the entity to support its mission effectively while managing liabilities prudently. The other choices, while related, do not encompass the core structure and management strategies necessary for a comprehensive debt policy.