When Is Debt Considered Excessive? [Podcast]

### How Much Debt is Too Much? [Podcast Recap]

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Grasping a company’s debt dynamics is vital for investors, as it can either fuel expansion or lead to financial difficulties. In this podcast episode, we delve into the advantages and disadvantages of debt, examine key metrics for its evaluation, and present real-life scenarios of firms succeeding—or faltering—under their debt obligations.

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### Key Insights from the Episode

#### **Debt Can Propel Growth**
Incorporating debt is not automatically negative. On the contrary, debt can serve as an effective leverage mechanism, allowing firms to finance major ventures and spur growth. Conversely, shunning debt entirely may limit expansion possibilities, making it a careful balancing act.

#### **Credit Ratings: Useful but Incomplete**
Credit evaluations from organizations like S&P Global, Moody’s, and Fitch provide insight into a firm’s financial well-being and its capability to meet debts. Yet, these ratings should not be the only measure—they require additional scrutiny to fully grasp a company’s fiscal circumstances.

#### **Important Ratios to Track**
When evaluating corporate debt, pay attention to two categories of ratios:
1. **Liquidity Ratios (e.g., current, quick, and cash ratios):** These illustrate a company’s financial stability in the short term.
2. **Solvency Ratios (e.g., debt-to-asset, debt-to-equity, and financial debt to EBITDA):** These show how well debt is managed over the long haul.
Always analyze these figures within the context of wider company performance and growth plans.

#### **Example: BCE (BCE) vs. Broadcom (AVGO)**
BCE exemplifies the dangers of heavy dependence on debt. Flat revenues, increasing expenses, and troubling liquidity ratios suggest possible challenges, including a potential dividend reduction. In contrast, Broadcom shines as a company successfully utilizing debt, leveraging it for growth, backed by solid revenue generation, cash flow, and R&D funding.

#### **Strategies for Debt Evaluation**
Assessing debt goes beyond mere numerical analysis. It necessitates a holistic view of the scenario, integrating ratios and credit ratings with a comprehensive understanding of the firm’s operations and market stance. Stay alert for warning signs that could signal impending issues.

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### Stocks with Manageable Debt and Growth Opportunities

One actionable way to determine if a company can manage its debt is to look at the growth it achieves. At [Dividend Stocks Rock (DSR)](https://dividendstocksrock.com), we assess firms using the **Dividend Triangle**—concentrating on three vital trends: revenue growth, earnings per share, and dividends.

Each year, we uncover prospects for dividend growth investors by selecting stocks that exhibit strong growth trajectories and manageable debt levels. These thoughtfully selected companies are well-positioned to outshine the market, earning their status among the **Top Stocks for 2025**!

Download 6 free stock ideas across three sectors from our 2025 picks now!

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### Related Content

Searching for more investment insights? Explore our **How to Invest in 2025** podcast series, detailing strategies and trends for enduring success.

How to Invest in 2025 [Podcast Series]

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We would love to hear from you! If you have ideas for podcast topics, guest recommendations, or simply wish to say hi, feel free to send us an [email](mailto:[email protected]).

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### A Special Thank You to Dividend Stocks Rock

This podcast episode is proudly sponsored by [Dividend Stocks Rock](https://dividendstocksrock.com), your ultimate resource for dividend investing strategies.

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By comprehending the influence of debt on a company’s performance and potential for growth, you can become a more informed and confident investor. Keep in mind, it’s not merely about the amount of debt a firm possesses.