NEW YORK - "Debt is a fixed expense," explains David Elias, president and chief investment officer at Elias Asset Management, "so when revenues take a hit, you've got a problem." This also means that companies without a heavy debt burden are better prepared to ride out a business slowdown.
Some industries, despite their great need for new plants and equipment, typically do not carry a lot of debt. The best example is semiconductors. Intel's (nasdaq: INTC - news - people) debt to equity is only 2%. "The capital intensity and unpredictability of the semiconductor business has typically argued against debt financing," says Richard Whittington, semiconductor analyst at Banc of America Securities. Whittington notes that the big chipmakers have little trouble raising money in the equity markets.
Full story at Forbes.com