Asked by Anonymous
Asked on 23 Apr 2019
The main reasons include different capital intensity levels between industries and whether the nature of the business makes carrying a high level of debt relatively easier to manage.
Capital-intensive industries, such as oil, gas or telecommunications, require significant financial resources and large amounts of money to produce goods or services.
If a company's performance is not subjected to fluctuation accordingly to the economy, it tends to be able to carry larger amounts of debt at a lower risk. For instance, industries that have a stable demand for their goods and services such as utilities, manufacturing tend to have higher debt-to-equity ratios.
As what Prof Damodaran said how much you borrow and in what currency depends on the nature of the business you are in.
If you are a stable business then you can borrow money
If you expect cashflow to be in the future then your debt should be long term
If you are not profitable then there is no reason to borrow money or worse borrow short term debt