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Comparison of Debt-equity Ratios Between Industries

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Refer to the observed capital structures given in Table 15.3 of the text. What do you notice about the types of industries with respect to their average debt-equity ratios? Are certain types of industries more likely to be highly leveraged than others? What are some possible reasons for this observed segmentation? Do the operating results and tax history of the firms play a role? How about their future earnings prospects?

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Solution Summary

This solution compares debt-equity ratios between industries, as well as explains reasons for differences in the leverage level between different industries. Examples are presented to highlight the main points.

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