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Can you tell me the rule of thumbs?

Asked Sep 21, 2006, 12:29 PM — 3 Answers
What are the rule of thumbs, the ideal range for:
Return on sales ROS
Debt to equity total debt/total equity

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CaptainForest's Avatar
CaptainForest Posts: 3,684, Reputation: 2085
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#2

Sep 21, 2006, 08:06 PM
It is hard to say.

You have a debt/Equity ratio of 0.8. Is that bad? I don’t know. It depends on your industry. If everyone in your industry has it around 0.8, then it is ok. If everyone is around 0.2, well, you have a problem.


But, general rules of thumb are:
Quote:
The debt/equity ratio will also be dependent on the industry in which the company operates. For example, capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio above 2, while personal computer companies have a debt/equity of under 0.5.
Source: http://www.investopedia.com/terms/d/debtequityratio.asp


As for ROS, you need to compare to others in the industries, but other ways are to compare within your own company from year to year.

If your ROS is increasing from year to year, it indicates the company is growing more efficient but if it is decreasing from year to year, it could be signalling looming financial troubles.
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cahitmanhart's Avatar
cahitmanhart Posts: 8, Reputation: 5
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#3

Sep 23, 2006, 12:13 PM
Thank you so much for your help, thank God I found this wonderful forum
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CaptainForest's Avatar
CaptainForest Posts: 3,684, Reputation: 2085
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#4

Sep 23, 2006, 01:08 PM
You're welcome
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