One of the factors I consider in picking stocks for my deep-in-the-money options trading system is debt. It's a primary consideration in my system, which has a win record of 95-1. Big debt doesn't rule out a potentially good stock pick, but it doesn't help. Several debt ratios put a company's leverage into perspective. Debt-to-equity ratios have ramifications for a company's ability to raise credit and keep interest expenses low. We can measure debt to equity in several ways. One of the simplest ways excludes short-term obligations. The ratio of long-term liabilities to shareholder equity helps us evaluate whether a stock is able to support its debt going forward. The higher the long-term liabilities-to-equity ratio, the lower the bond rating. And a rating reduction forces companies to pay higher interest rates. You can calculate the ratio by subtracting current liabilities from total liabilities -- which are found on the balance sheet -- and then dividing by total shareholder equity. What you get with this ratio is a measure of how leveraged a company is. A highly leveraged company carries a greater risk it will default on its debt. How much debt a company can sustain varies by sector. Industries with highly stable revenue streams -- such as utilities -- tend to carry a lot of debt safely. A measure of 1.0 means a company's liabilities equal its equity value. The safest ratios fall far below 1.0. Microsoft ( MSFT) historically carries little or no debt. At the end of December, its long-term liabilities to equity measured 0.22. Its long-term liabilities included $7.6 billion of "other liabilities," such as legal reserves and tax contingencies. None of Microsoft's long-term liabilities were debt.