Rational Investing with Ratios by Yannick Coulon

Author:Yannick Coulon
Language: eng
Format: epub
ISBN: 9783030342654
Publisher: Springer International Publishing

Retail

Carrefour

Walmart

Target

Net debt/total equity

34%

63%

86%

Energy

EDF

Duke

National Grid

Net debt/total equity

125%

131%

147%

Car industry

FCA

Volkswagen

GM

Net debt/total equity

Net debt < 0

132%

175%

There are general sector differences but also specific company differences within sectors.

A company carrying a negative debt may be the consequence of an extremely high profitability, but it may also be the result of substantial underinvestment. Underinvestment and overinvestment are both detrimental to the financial health of a company, the former may weaken the long-term generation of EBITDA (low competitivity), the latter may weaken the capital structure (high financial leverage) and cash generation (high debt service). The right balance between must be struck. See the proposed merger between PSA and FCA which allows investment spreading across the two entities (Nov. 2019).

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