CHAPTER 12 Leverage and Capital Structure 523TABLE 12.8 Debt Ratios for Selected Industries and
Lines of Business (Fiscal Years Ended
4/1/00 Through 3/31/01)Times interest
Industry or line of business Debt ratio earned ratioManufacturing industries
Books 65.2% 3.3
Dairy products 74.6 3.0
Electronic computers 55.4 3.4
Iron and steel forgings 62.7 2.3
Machine tools, metal cutting types 60.4 2.4
Wines & distilled alcoholic beverages 69.7 4.4
Women’s, misses’ & juniors’ dresses 53.5 2.4
Wholesaling industries
Furniture 69.4 3.0
General groceries 66.8 2.8
Men’s and boys’ clothing 60.8 2.6
Retailing industries
Autos, new and used 76.1 1.4
Department stores 52.8 2.3
Restaurants 92.5 2.3
Service industries
Accounting, auditing, bookkeeping 68.4 5.6
Advertising agencies 81.3 4.2
Auto repair—general 75.9 2.5
Insurance agents and brokers 94.1 4.1
Source: RMA Annual Statement Studies, 2001–2002(fiscal years ended 4/1/00 through
3/31/01) (Philadelphia: Robert Morris Associates, 2001). Copyright © 2001 by Robert Morris
Associates.
Note:Robert Morris Associates recommends that these ratios be regarded only as general
guidelines and not as absolute industry norms. No claim is made as to the representativeness of
these figures.The level of debt (financial leverage) that is acceptable for one industry or
line of business can be highly risky in another,because different industries and
lines of business have different operating characteristics. Table 12.8 presents the
debt and times interest earned ratios for selected industries and lines of business.
Significant industry differences can be seen in these data. Differences in debt posi-
tions are also likely to exist withinan industry or line of business.
Capital Structure of Non-U.S. Firms
In general, non-U.S. companies have much higher degrees of indebtedness than
their U.S. counterparts. Most of the reasons for this are related to the fact that U.S.
capital markets are much more developed than those elsewhere and have played a