Quote:
Originally Posted by Reporter
"It's common for large, well-established companies to have Debt-to-Equity ratios exceeding 1. For instance, GE carries a Debt-to-Equity ratio of around 4.4 (440%), and IBM around (1.3)130%."
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GE has a large financial services component that takes deposits. Most banks have debt to equity of 5-10 because of that. So you can't compare financial services type companies to normal industrial companies.
IBM is an asset light company. It generates remarkable net income for it's balance sheet size, hence debt/equity is not relevant. If you look at its debt/free cash flow, it's less than 2x and it has interest coverage of debt of over 50x.
If you are a loanshark, then you would have an incredibly high debt/equity ratio like GE
If you are a a fresh Harvard MBA who just got a job earning $500K out of college, but your only asset is a $200K BMW, now depreciated to $140K, that you took a $180K loan for. Your debt/equity is 1.3x but you are in an excellent position.