Joseph_B._Wirthlin called debt a " a financial termite! I usually check the PE of a share, and then ROE and ROCE. But then on the spur of a moment, I decided to search for a screen for low-debt companies. It does exist. And to my pleasant surprise, many of them appear good on my other favourite parameters too.
That’s always my first criteria. I generally put D/E less than 0.3. Other non negotiable criteria are promoter holding greater than 50% (skin in the game) and pledged percentage = 0.
I actually posted some bits of my investment journey here :
Never paid focus and attention to my investments till now. It was just a sideline activity. But now seriously looking into it and have done a lot of changes into it. Hopefully, will have some good returns over next few years.
Most companies need debt either for long term needs or for working capital. Some are using debt because cost of debt is lower and they can re invest surpluses at better rates
some companies use low rate of interest as a competitive advantage …
service based companies need little or no debt.
Consumer companies need debt in their first 10 years of existence and after that they are pretty much debt free …
There are parameters like Debt service coverage ratio and Interest coverage to check…