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Issue Report

Collection of full-length papers and in-depth analysis of economic and management issues.

Estimating Appropriate Debt-to-Equity Ratios in Different Industries

Estimating Appropriate Debt-to-Equity Ratios in Different Industries

KWON Soon-Woo

Dec. 1, 1999

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Abstract

I. Reducing the debt-to-equity ratio: current status and issues

A. Current status

Over-reliance on debt-financing is recognized as one of the principal causes of the currency crisis. Consequently, reducing debt-to-equity ratios to manageable levels is a central concern of the economic restructuring process that is currently underway. Excessive debt not only reduced the profitability of businesses, it also exacerbated the domestic liquidity crisis that was triggered by the currency crisis. The table below illustrates the dramatic increase in debt-toequity ratios immediately prior to the currency crisis.

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