Investors should monitor several financial indicators to evaluate whether a company's debt levels are manageable and sustainable. One of the most important measures is the debt-to-equity ratio, which compares total debt with shareholders' equity. A high ratio may indicate greater financial leverage and increased risk, although acceptable levels vary significantly between industries.

The debt-to-assets ratio is another useful indicator because it shows what portion of a company's assets is financed through borrowing. Investors should also examine the net debt-to-EBITDA ratio, which compares debt after subtracting cash with operating earnings. This can provide insight into how quickly a company might theoretically repay its debt from operating performance.

The interest coverage ratio is particularly important. It measures how easily a company's operating earnings can cover interest expenses. A declining ratio may signal increasing financial pressure. Investors should also review free cash flow and operating cash flow, as strong cash generation helps a company meet interest and principal payments.

Debt maturity schedules deserve attention as well. Large amounts of debt coming due soon may create refinancing risks, especially when interest rates are high. Investors should examine the company's credit rating, borrowing costs, debt covenants, and access to unused credit facilities.

Finally, investors should compare current debt levels with historical figures and industry peers. Rising debt is not necessarily negative if borrowed funds are being used productively to expand the business and generate higher returns. However, rapidly increasing leverage combined with weak cash flow and declining earnings can be a warning sign. By considering these indicators together rather than relying on a single ratio, investors can develop a clearer understanding of a company's financial strength and debt-related risks.