Which financial metric is used to assess a company's profitability along with its debt levels?

The debt-to-equity ratio is a key financial metric used to assess a company's profitability in conjunction with its debt levels. This ratio measures the relative proportion of shareholders' equity and debt used to finance a company's assets.

When evaluating profitability, it is crucial to consider how much debt a company is carrying in relation to its equity, as high levels of debt can imply higher financial risk. A company with a strong profitability measure but high debt levels may face challenges in meeting its obligations, which can impact its financial stability. Conversely, a healthy balance between debt and equity can indicate that a company is effectively leveraging its debt to enhance returns on equity.

This ratio is particularly insightful for investors and analysts who want to understand a company's capital structure and its ability to generate profits while managing debt. By comparing the debt-to-equity ratio across companies in the same industry, stakeholders can assess how well a company is positioned to handle its debts relative to the equity it holds, thus providing a comprehensive view of its financial health.