What is a good long-term debt to equity ratio?
Understand the Problem
The question is asking about the ideal long-term debt to equity ratio, which indicates how much debt a company is using to finance its assets relative to its equity. It seeks to understand what is considered a healthy or balanced level of this ratio in finance and investment.
Answer
Around or below 2.0, but varies by industry.
The final answer is a good long-term debt to equity ratio is generally around or below 2.0, but it varies by industry.
Answer for screen readers
The final answer is a good long-term debt to equity ratio is generally around or below 2.0, but it varies by industry.
More Information
The ideal debt to equity ratio varies significantly depending on the industry. For example, capital-intensive industries may tolerate higher ratios. It's also important to consider the company's ability to service the debt when evaluating the ratio.
Tips
A common mistake is not taking industry-specific factors into account. Always compare the ratio to industry benchmarks.
Sources
- What Is A Good Debt-To-Equity Ratio: An Investor's Guide - fortunebuilders.com
- Debt-to-equity ratio calculator | BDC.ca - bdc.ca
- What is considered a good net debt to equity ratio? - investopedia.com
