Fundamental / Technical Analysis - Is debt funding good in STRATEGIES & PLANS - Debt, is an integral part of any firm to grow. However how you utilise the debt and how are you ...
10-12-2012 03:39 PM
Is debt funding good
Debt, is an integral part of any firm to grow. However how you utilise the debt and how are you able to pay back the debt out of profits in time is the key to good investor friendly companies.
Companies like Sun Pharma , lupin though they took some debt during their initial years, they have made enough profits and have been able to maintain a low leverage through plough back of profits.
Key ratios to choose a good company with low leverage
• Debt/EBITDA should not be greater than 4 times.
• Interest coverage should be more than 3 times
• Debt/Equity should be less than 1.0 times
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