Debt measures the share of borrowing in how the company is financed. Debt is not bad in itself: it funds growth. But too much debt weakens a business.

The key indicators

• Debt-to-equity ratio: debt ÷ shareholders’ equity. Above 1, the company owes more than it owns outright.
• Repayment capacity: financial debt ÷ EBITDA. How many years to repay everything? Beyond three or four years, caution is required.
• Financial independence: shareholders’ equity ÷ total funding. The higher it is, the less the company depends on banks.

An over-indebted company is vulnerable: the slightest drop in activity prevents repayment, and interest charges eat into the bottom line.

Key takeaway: a little debt is healthy, too much is dangerous. Check whether the company can repay out of what it earns.