Originally Posted by TransWorld

Financial and corporate people look at Debt to ASSET ratios. They do not look at Debt to Equity.

If a company that has to buy equipment, via Debt, is in a position where they have no Equity, that does not mean they are not credit worthy.

As an example, if a person just starting out buys a house, and has no equity (calculated like they are a business), their debt to equity is zero. But, assuming they put down 20% on the house, their debt to asset ratio is 0.80. Which would a bank consider in making the house loan?

Another barometer is what percentage of their free cash flow (you may call it income, but more properly it is free cash flow) has to be dedicated to paying the debt, and is that reasonable.