Leverage benchmark · 11 sectors
Debt Ratio by Industry (2025 Benchmarks)
The total debt ratio — total liabilities divided by total assets — measures how much of a company's asset base is financed by creditors rather than equity. It ranges from near zero for cash-rich tech companies to above 0.90 for banks, which operate with structural high leverage by design. This table shows the sector median and typical range for 11 GICS sectors so you can judge whether a company's leverage is conservative, normal, or stretched relative to its industry. Use the debt ratio calculator to compute it for any ticker, or compare with the debt-to-equity by industry benchmarks.
2025 data · 11 sectors
Debt Ratio Benchmarks by Sector
| Sector | Median Ratio | Typical Range | Notes |
|---|---|---|---|
| Technology | 0.35 | 0.20–0.55 | Asset-light software and SaaS carry minimal debt; semiconductor fabs and hardware OEMs at the high end on capex financing |
| Healthcare | 0.40 | 0.25–0.60 | Large pharma at 0.45–0.55 on acquisition debt; biotech startups near 0.25–0.35 on equity-funded cash; hospital systems at 0.55–0.65 |
| Consumer Discretionary | 0.55 | 0.35–0.72 | Auto OEMs and luxury goods at 0.55–0.65 on capex; e-commerce and apparel at 0.35–0.50 with lighter balance sheets |
| Consumer Staples | 0.55 | 0.40–0.70 | Large CPG companies carry moderate debt from acquisitions and dividends; grocery chains at 0.60–0.70 on lease obligations |
| Financials | 0.87 | 0.80–0.95 | Banks operate with structural high leverage — deposits and borrowings are liabilities; equity is a small fraction of total assets by design |
| Industrials | 0.52 | 0.35–0.68 | Defense and aerospace at 0.45–0.55; heavy-equipment manufacturers and freight companies at 0.55–0.68 on fleet and plant financing |
| Energy | 0.48 | 0.30–0.65 | Integrated majors at 0.45–0.55; E&P companies at 0.50–0.65 on reserve-backed debt; midstream infrastructure at 0.55–0.65 |
| Materials | 0.45 | 0.28–0.62 | Specialty chemicals at 0.45–0.55; mining and metals at 0.30–0.50 depending on commodity cycle and expansion phase |
| Real Estate | 0.60 | 0.45–0.75 | REITs fund property portfolios primarily with debt; leverage varies by property type — net-lease at 0.40–0.55, office and mall at 0.60–0.75 |
| Utilities | 0.62 | 0.50–0.75 | Regulated utilities use debt to finance long-lived infrastructure; high ratios are structurally safe given predictable regulated cash flows |
| Communication Services | 0.52 | 0.35–0.68 | Telecom carriers at 0.55–0.68 on spectrum and network debt; digital media and streaming platforms at 0.35–0.50 with lighter capex |
What Is a Good Debt Ratio?
The debt ratio measures the share of a company's assets that is funded by creditors. A ratio of 0.60 means 60 cents of every dollar of assets came from lenders or suppliers rather than from shareholders. What counts as “good” depends almost entirely on the sector.
Below 0.40 — Conservative or cash-rich. Companies below 0.40 are predominantly equity-financed. This is common in high-cash-flow Technology and Healthcare businesses that generate more cash than they need and carry little formal debt. A low ratio typically signals financial flexibility and low refinancing risk, but it can also indicate an underleveraged balance sheet that is not optimizing the tax shield of interest deductions.
0.40 to 0.65 — Moderate and manageable for most sectors. Most well-run Industrials, Consumer, and Materials companies operate in this band. Debt is used to finance capital expenditures, acquisitions, and working capital while keeping equity as the primary funding source. A ratio in this range is rarely a concern as long as the interest coverage ratio is above 3× and the debt has manageable maturities.
Above 0.65 — Elevated, but often structural. Utilities and Real Estate routinely exceed 0.65 because regulated cash flows and property income make high debt loads serviceable and cost-effective. For non-utility, non-financial businesses, a ratio above 0.70 warrants a closer look at interest coverage, debt maturity, and free cash flow. Financials operate above 0.85 as a feature of the banking business model — their liabilities are customer deposits, not traditional debt — so the debt ratio is not the right lens for banks.
How to Use This Data
1. Benchmark within sector, not across sectors
A Utility at 0.65 and a Technology company at 0.65 are in very different positions. Utilities at 0.65 sits near their sector median — normal. A tech company at 0.65 is well above its 0.35 median and warrants scrutiny. Always compare to the row that matches the company's primary business. Use the debt ratio calculator to compute a live reading for any ticker and benchmark it here.
2. Pair with interest coverage
The debt ratio tells you the balance-sheet stock of leverage; the interest coverage ratio tells you whether the company can afford its debt from current earnings. A high debt ratio with interest coverage above 5× is manageable. A moderate debt ratio with interest coverage below 2× is a warning. Neither metric alone is sufficient — read them together for a complete picture of financial health.
3. Watch the trend over time
A debt ratio rising faster than assets grow can signal aggressive acquisition financing or deteriorating equity from losses. A ratio falling over several years typically reflects debt paydown or equity growth from retained earnings — both signs of financial strengthening. Compare the current ratio to the company's 5-year average and to the D/E benchmarks to triangulate the full leverage picture.
Common questions
Debt ratio by industry — answered directly.
What is a good debt ratio by industry?
A healthy debt ratio depends entirely on the sector. For most non-financial businesses, a ratio below 0.50 is considered conservative, and 0.40–0.60 is typical across Industrials, Materials, and Consumer sectors. Utilities and Real Estate routinely exceed 0.60 — that is structural, not a warning sign, because regulated cash flows and property income support the debt. Financials operate above 0.85 by design. Always compare a company's debt ratio to its sector median in the table above, not to a universal benchmark.
What is the difference between the debt ratio and the debt-to-equity ratio?
The debt ratio (total liabilities / total assets) and the debt-to-equity ratio (total debt / shareholders' equity) measure the same underlying leverage from different angles. The debt ratio is bounded between 0 and 1, making it easy to compare across sectors — a ratio of 0.60 means 60% of assets are financed by creditors. The D/E ratio is unbounded and can exceed 3.0 or 5.0 for highly leveraged sectors. For most screening and benchmarking purposes, the debt ratio is easier to use because it does not blow up when equity is near zero. Both metrics should be read in conjunction with the interest coverage ratio and free cash flow.
Why do banks have debt ratios above 0.85?
Banks and financial institutions are structurally different from operating companies. Their primary liabilities are customer deposits and borrowings — money owed to depositors — which fund the loan assets on the other side of the balance sheet. A bank with $1 trillion in assets might carry $870 billion in liabilities and only $130 billion in equity, giving a debt ratio of 0.87. This is not distress; it is the business model. Bank solvency is assessed through capital ratios (Tier 1, CET1) set by regulators, not through the debt ratio. For this reason, the debt ratio is most useful when benchmarking non-financial companies within the same sector.
How is the total debt ratio calculated?
The total debt ratio equals total liabilities divided by total assets, both taken directly from the balance sheet. Total liabilities include everything the company owes: accounts payable, accrued expenses, short-term debt, the current portion of long-term debt, deferred revenue, long-term bonds, lease obligations, and pension liabilities. Total assets include cash, receivables, inventory, property, equipment, and intangibles. For example, $600M in total liabilities and $1B in total assets gives a debt ratio of 0.60. A ratio above 0.70 for a non-financial, non-utility company warrants a closer look at the interest coverage ratio and debt maturity schedule.
Related Tools & Resources
Debt Ratio Calculator
Compute total liabilities / total assets for any ticker and benchmark against the sector medians above.
Debt-to-Equity by Industry
The companion leverage benchmark — sector medians and typical ranges for the D/E ratio.
Debt-to-Equity Calculator
Compare leverage using the D/E ratio — total debt divided by shareholders' equity — for any public company.
Working Capital by Industry
Short-term liquidity benchmarks by sector — working capital as a percentage of revenue.
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