Corporate America Is In Fantastic Financial Shape


Two measures of business debt levels have plunged to multi-year lows since the financial crisis.


Deutsche Bank's David Bianco published two charts in a research note Sunday that show how much S&P 500 companies (excluding financials) have deleveraged their balance sheets, or reduced their debt.

First,the percentage of net sales that companies use to pay interest accrued on their debt, or the interest expense to sales ratio, has fallen significantly. According to the chart, its at the lowest level since the start of the great inflation of the 1970s.

Similarly, there's been a decline in the net debt to market cap ratio, which is how liabilities compare to market cap.


Deutsche Bank

This is good news for anyone worried about the financial flexibility of corporate America. With debt and interest cost levels this low, companies will have space to withstand a pullback in sales should the economy slow down.