Debt Ratio Regression: January 2013
Variables used in the regression
Ratio = Debt/ (Market Value of Equity + Debt): If you can get market value
of debt, use it. Else, use book value of debt.
Holdings = Shares held by insiders/ Primary number of shares outstanding.
(Available on Yahoo! Finance)
Assets / Total Assets =Book Value of Fixed Asets/ Book value
of Total Assets
Enterprise Value = EBITDA/ (Market Value of Equity + Book value of Debt - Cash)
- How do I use this regression?
you want to estimate the market debt ratio for a firm with the following
Enterprise Value = 8%
Insider holdings as % of outstanding shares = 10%
Effective tax rate = 30%
Fixed Assets / Total Assets = 15%
Debt Ratio= 0.535 + 0.069 *.08 - 0.078*.10 - 0.867 *.30 - 0.149 (.15) = .25027 or 25.03%
predicted value is less than zero, your predicted debt ratio is zero.