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Debt to equity ratio by industry

The debt to equity ratio is a financial metric that is commonly used by investors and analysts to evaluate a company's financial health. It measures the amount of debt a company has compared to its equity, or the amount of ownership the company's shareholders have in the company.

The debt to equity ratio is useful for investors because it provides insight into a company's financial health and risk profile.

The debt to equity ratio can vary widely across different industries, and understanding the average debt to equity ratio by industry is crucial for making informed investment decisions.

Average Debt to Equity Ratio by Industry

The average debt to equity ratio varies significantly across different industries. For example, capital-intensive industries such as utilities and telecommunications tend to have higher debt to equity ratios, while technology and healthcare companies typically have lower ratios. A table or chart displaying the average debt to equity ratio by industry can provide valuable insights into industry trends and benchmarks.

Here is a table showing average debt to equity ratios by industry in the US as of Jan 2025:

IndustryAverage debt to equity ratioNumber of companies
Advertising Agencies0.5424
Aerospace & Defense0.4653
Agricultural Inputs0.4211
Airlines1.3711
Apparel Manufacturing0.9716
Apparel Retail1.2229
Asset Management177
Auto Manufacturers116
Auto Parts0.4347
Auto & Truck Dealerships2.1813
Banks - Diversified1.456
Banks - Regional0.62298
Beverages - Non-Alcoholic0.812
Beverages - Wineries & Distilleries0.376
Biotechnology0.15513
Broadcasting1.9215
Building Materials0.59
Building Products & Equipment0.7229
Business Equipment & Supplies0.927
Capital Markets0.5637
Chemicals0.8418
Coking Coal0.444
Communication Equipment0.4645
Computer Hardware0.4327
Conglomerates0.8913
Consulting Services0.4817
Consumer Electronics0.6311
Copper0.624
Credit Services0.8645
Diagnostics & Research0.3564
Discount Stores1.048
Drug Manufacturers - General0.7612
Drug Manufacturers - Specialty & Generic0.5545
Education & Training Services0.3417
Electrical Equipment & Parts0.4341
Electronic Components0.3432
Electronic Gaming & Multimedia0.357
Electronics & Computer Distribution0.275
Engineering & Construction0.7830
Entertainment0.7739
Farm & Heavy Construction Machinery0.721
Farm Products0.4216
Financial Data & Stock Exchanges0.7911
Food Distribution1.339
Footwear & Accessories0.8411
Furnishings, Fixtures & Appliances0.7821
Gambling1.8811
Gold0.1728
Grocery Stores1.1310
Healthcare Plans0.5412
Health Information Services0.3832
Home Improvement Retail0.917
Household & Personal Products0.6225
Industrial Distribution0.6917
Information Technology Services0.5153
Insurance Brokers0.8912
Insurance - Diversified0.3712
Insurance - Life0.5414
Insurance - Property & Casualty0.3237
Insurance - Reinsurance0.398
Insurance - Specialty0.3117
Integrated Freight & Logistics0.7615
Internet Content & Information0.3440
Internet Retail0.4525
Leisure0.9525
Luxury Goods1.216
Marine Shipping0.7524
Medical Care Facilities0.6339
Medical Devices0.3797
Medical Instruments & Supplies0.3845
Metal Fabrication0.4912
Mortgage Finance1.2717
Oil & Gas Drilling0.467
Oil & Gas E&P0.561
Oil & Gas Equipment & Services0.549
Oil & Gas Integrated0.566
Oil & Gas Midstream0.9836
Oil & Gas Refining & Marketing0.8617
Other Industrial Metals & Mining0.2217
Other Precious Metals & Mining0.1112
Packaged Foods0.9843
Packaging & Containers1.620
Personal Services1.5511
Pollution & Treatment Controls0.3810
Publishing0.557
Railroads0.928
Real Estate - Development0.4510
Real Estate - Diversified1.024
Real Estate Services1.126
Recreational Vehicles0.9114
REIT - Diversified1.3820
REIT - Healthcare Facilities1.1218
REIT - Hotel & Motel1.1815
REIT - Industrial0.9516
REIT - Mortgage2.939
REIT - Office1.3424
REIT - Residential1.3118
REIT - Retail1.224
REIT - Specialty1.5816
Rental & Leasing Services1.3320
Residential Construction0.4320
Resorts & Casinos2.5118
Restaurants0.9843
Scientific & Technical Instruments0.4824
Security & Protection Services0.7514
Semiconductor Equipment & Materials0.3425
Semiconductors0.3566
Software - Application0.34191
Software - Infrastructure0.4198
Solar0.514
Specialty Business Services0.6125
Specialty Chemicals0.6543
Specialty Industrial Machinery0.5478
Specialty Retail1.0838
Staffing & Employment Services0.3523
Steel0.3315
Telecom Services0.9532
Thermal Coal0.189
Tools & Accessories0.6110
Travel Services1.4711
Trucking0.4112
Uranium0.465
Utilities - Diversified1.215
Utilities - Regulated Electric1.5524
Utilities - Regulated Gas1.4814
Utilities - Regulated Water1.0213
Utilities - Renewable0.9111
Waste Management1.0712

Based on the information in the table above, the REIT - Mortgage industry has the highest average debt to equity ratio of 2.9, followed by Resorts & Casinos at 2.51. In contrast, the Other Precious Metals & Mining industry has the lowest average debt to equity ratio of 0.11, followed by the Biotechnology industry at 0.15.

Industries with highest debt to equity ratio

You can explore the industries with the highest debt to equity ratio in the following chart and table. In the chart below, you can also sort industries by sector to see the top industries with the highest debt to equity ratio in each sector.

IndustryAverage debt to equity ratioNumber of companies
REIT - Mortgage2.939
Resorts & Casinos2.5118
Auto & Truck Dealerships2.1813
Broadcasting1.9215
Gambling1.8811
Packaging & Containers1.620
REIT - Specialty1.5816
Utilities - Regulated Electric1.5524
Personal Services1.5511
Utilities - Regulated Gas1.4814

Industries with lowest debt to equity ratio

Industries with the lowest debt to equity ratio are indicated in the chart and table below. You can select a sector in the chart to find out the industries with the lowest debt to equity ratio in that sector.

IndustryAverage debt to equity ratioNumber of companies
Other Precious Metals & Mining0.1112
Biotechnology0.15513
Gold0.1728
Thermal Coal0.189
Other Industrial Metals & Mining0.2217
Electronics & Computer Distribution0.275
Insurance - Specialty0.3117
Insurance - Property & Casualty0.3237
Steel0.3315
Education & Training Services0.3417

Interpretation of the Debt to Equity Ratio

Interpreting the debt to equity ratio requires comparing a company's ratio to industry benchmarks and analyzing trends over time. In general, high debt to equity ratio may indicate that a company is heavily leveraged and could be at risk of default, while a low ratio may suggest that a company has a stronger financial position.

Factors That Influence the Debt to Equity Ratio

Several factors can influence a company's debt to equity ratio, including the industry it operates in, the business cycle, capital structure, mergers and acquisitions, and interest rates.

There are a few reasons why some industries tend to have higher debt to equity ratios than others. Here are a few key factors:

  1. Capital Intensity: Industries that require large investments in fixed assets, such as utilities and telecommunications, may have higher debt to equity ratios. This is because they need to finance these investments with debt to maintain their operations.
  2. Industry Structure: Some industries have higher debt to equity ratios due to their unique market dynamics. For example, in the energy industry, companies often require large amounts of debt to finance exploration and production activities.
  3. Profit Margins: Industries with higher profit margins may be able to sustain higher levels of debt due to their ability to generate cash flow to service their debt obligations. This is why industries such as technology tend to have lower debt to equity ratios, as they typically have high profit margins.
  4. Regulatory Environment: The regulatory environment in which an industry operates can also impact the debt to equity ratios of its companies. For example, heavily regulated industries such as utilities may have limitations on their ability to raise equity, leading to higher debt levels.

Understanding these factors can help investors and analysts make informed investment decisions and evaluate a company's financial health.

Advantages and Limitations of Using the Debt to Equity Ratio

The debt to equity ratio has several advantages as a financial metric, including its simplicity and ability to provide a clear picture of a company's capital structure. However, it also has some limitations, such as not accounting for differences in tax rates, variations in accounting practices, and the potential impact of off-balance sheet financing.