Importance of Capital Vs. Debt

The debt-to-equity ratio measures the amount of debt capital a firm uses compared to the amount of equity capital it uses.

The following table represents debt equity ratio as well as PBT margin percentage of top 5 companies by market capitalisation of various Industries.

Sr. No.	Name of Company	Type of Industry	Debt Equity Ratio*	PBT margin %
	Reliance Industries Ltd.	Refineries	0.70	11.79
2.	Tata Consultancy Services Ltd.	Software	-	28.25
3.	ITC Ltd.	Cigarrates	-	26.49
4.	Hindustan Unilever Ltd.	Personal Care products	0.04	17.93
5.	Maruti Suzuki India Ltd.	Cars and Jeeps	0.01	12.72

*Debt Equity ratio = Debt/Total Equity

From the above table it can be seen that the larger companies have lower debt equity ratio of less than 1. It indicates that the company's lenders have less money in the company than its equity holders.

It also indicated good companies have profit before tax in range of 12-28% and hence they claim better valuation.

These numbers may inspire/give guidance to SME entrepreneur who are planning for IPO.