Debt to Equity Ratio
Debt to Equity Ratio indicates the operating leverage of a Company as it measures the relative contribution of shareholder equity and corporate liability to a company's capital
The ratio varies across different industries. For manufacturing companies, the debt to ratio is generally close to 1:1 but it depends on the nature of the product, sales regularity and cycles, profitability of the Company.
In a manufacturing company, a very high debt to equity ratio can be a cause of concern for the investor/Lender for assessing the Company's debt servicing capabilities where as a very low debt to equity ratio can impact the Return on Equity (ROE) for the investor
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