In businessweek, if you are viewing the debt/equity ratio of a company, what does the 'x' stand for?

Question

Also, what is exactly a 'high' and a 'low' ratio? Is 150 considered high for a manufacturing company?

Answer 1

Businessweek is using a rather unconventional way of expressing debt/equity.  Normally, it is expressed as a ratio.  If a company has $1 in debt for each $1 in equity, it is expressed as 1.00.  Businessweek is expressing it as 100x.  You can make this determination yourself by comparing the way Yahoo finance expresses the ratio with the way Businessweek expresses the ratio.  

In my opinion 150x is very high for a manufacturing company.  The ratio says that for each $1 in equity they have $1.50 in debt, so they are very highly leveraged.  Not nearly so high as the Wall Street Investment banks, which are now somewhat regretting their very high leverage, but nevertheless high.  When there is an economic downturn, high debt means that the interest expense on that debt can become very burdensome.  A company can not cut back on its interest expense.  Conservatively leveraged manufacturing companies have about $0.50 in debt for each $1.00 in equity or as Businessweek would express it 50x