      aswathdamodaran.blogspot.com · 2023-02-27
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Musings on Markets: Data Update 6 for 2023 — A Wake-up Call for the Indebted

This comprehensive analysis examines corporate debt in 2023, distinguishing between good reasons for borrowing (tax benefits) and bad ones (illusory equity returns). The article provides frameworks for determining optimal debt ratios by balancing tax benefits against bankruptcy costs, and assesses global default risk in light of rising interest rates and macroeconomic headwinds.

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Metrics in this report

Adani Enterprises Actual vs. Optimal Debt

413,443 vs. 185,309 millioncurrency units

Case study showing over-leverage; actual debt more than double optimal

Adani Group Collective Debt vs. Optimal

3x optimalmultiple

Aggregated across seven publicly traded Adani companies

Debt Ratio by Region (Book Value)

United States highestpercent

Weighted average across all firms by region, 2023

Debt Ratio by Region (Market Value)

Latin America and Canada highestpercent

Weighted average across all firms by region, 2023

Interest Coverage Ratio (Utilities)

1.17times

aggregate sector

Utilities sector, publicly traded US firms

Median Debt Ratio (Global)

10-20percent of capital

median

Global publicly traded non-financial firms at start of 2023