Low Debt companies

How do you classify a debt amount to be a 'low' or a 'high' amount.

A company 'X' has a total debt of 50 crores (sum of all kinds of debts). How to classify this 50 crores as a low or a 'high' amount of debt for that company?

It is simple - Compare debt to equity or look at Debit : Equity ratio. Here's investopedia :

http://www.investopedia.com/terms/d/debtequityratio.asp

Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company’s total liabilities by its stockholders' equity. The D/E ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders’ equity.

The formula for calculating D/E ratios can be represented in the following way:

Debt : Equity Ratio = Total Liabilities / Shareholders' Equity

The result may often be expressed as a number or as a percentage. This form of D/E may often be referred to as risk or gearing.

2. This ratio can be applied to personal financial statements as well as corporate ones, in which case it is also known as the Personal Debt/Equity Ratio. Here, “equity” refers not to the value of stakeholders’ shares but rather to the difference between the total value of a corporation or individual’s assets and that corporation or individual’s liabilities. The formula for this form of the D/E ratio, then, can be represented as:

D/E = Total Liabilities / (Total Assets - Total Liabilities)


Full article is here :

http://www.investopedia.com/terms/d/debtequityratio.asp#ixzz3wXoDkTjt
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Thanks DSM. Please visit this thread often. Its likely that you will get more newbie like questions here in the future.

This is really helps me a lot since I am a newbie in business. I read all your post and all are very helpful and informative. Thanks