Refer to the observed capital structures given in Table 13.5 of the text. What do you notice about the types of industries with respect to their average debt-equity ratios? Are certain types of industries more likely to be highly leveraged than others? What are some possible reasons for this observed segmentation? Do the operating results and tax history of the firms play a role? How about their future earnings prospects? Explain.

*Debt is the book value of preferred stock and long-term debt, including amounts due in one year. Equity is the market value of outstanding shares. Total capital is the sum of debt and equity. Median values are shown.

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TABLE 13.5 Capital structures for U.S. industries Ratio of.Debt 1o Total Ratio of DebtNumber of SIC Capitat to Equity CompaniesCodeRepresentative Companies Industry 283 Merck, Plizer 291 ExxonMobl, ChevronTexaco 331 United States Steel, Nucor 357 DeB, Hewlet-Packard 367 Intl, Texas instruments 371 General Motors, Ford 45t Deita, Southwest 481 Verizon, AT&T 484 Comcast, DirecTV 531 Kohs, Neiman Marcus 533 Wal-Mart, Target 541 Kroger, Safeway 573 Best Buy, Circuit City 581 McDonald's, Wendy's 602 Bank ot America, Wells Fargo 621 Meil Lynch. T.D. Ameritrada Druos Petroleum refining Stee! Computers 6.39 22.30 34.68 28.70 26.36 64.35 39.83 37.26 749 35.79 180.48 66.38 Molor vehicles Airlines Telephone Cable and pay television Department stores Variety stores Grocary stores Consumer electronics Eating and drinking places Banks Brokers 85.63 8.93 39.92 9.67 27.00 42.39 29.54 36.98 73.59 42.77