Debt is a crucial factor to check before investing in any company. While zero debt on a company validates its financial health, on the other hand, a heavy debt on the company can be taken as a sign of troublesome company and to stay away from it.
A low debt company can enjoy a higher profit margin and higher solvency. On the contrary, high debt companies have to pay high interest and hence have a higher cost of capital. Overall, huge debt restricts a company from expanding and decreases profits.
A few of the top debt free companies in India are TCS, Infosys, Maruti Suzuki, ITC, Hero MotoCorp, Titan company, etc.
The debt-to-equity ratio measures the relationship between the amount of capital that has been borrowed (i.e., debt) and the amount of capital contributed by shareholders (i.e., equity).