Use of Debt in the Capital Structure Outstanding corporate debt increased by 46% between 1995 and 1999. This increase prompted some observers to express concern about the financial health of the nonfinancial corporate sector. An article entitled, "Rapidly Rising Corporate Debt: Are Firms Now Vulnerable to an Economic Slowdown," (Links to an external site.)Links to an external site. was published by the Federal Reserve Bank in June of 2000. The relevance of this analysis to current conditions is very interesting. After reading the article, address the following questions: What three measures of corporate health give us a clearer picture of the relationship between corporate indebtedness and vulnerability? Why would the central measure of corporate leverage be distorted by the inclusion of hi-tech firms in the sector-wide average? Solvency is measured by computing the Z-score. What five accounting ratios are combined to give the Z-score? What conclusions do the authors make with respect to a firm's vulnerability to a downturn in the economy or financial markets?