What generally happens to leverage ratios as a company matures?

As a company matures, leverage ratios generally tend to increase. This is because, over time, a mature company often takes on additional debt to finance growth opportunities, acquisitions, or to optimize its capital structure. As the company continues to generate cash flow, it may feel more confident in its ability to service additional debt, leading to higher leverage ratios.

Furthermore, a mature company might have established relationships with lenders and a strong credit profile, allowing it to access debt markets more readily. This can contribute to the trend of increasing leverage as the company strategically uses borrowed funds to leverage its equity and potentially amplify returns on investments.

In contrast, while some companies might initially experience a decrease in leverage as they pay down earlier debts or focus on building a more solid equity base, this trend often reverses in later stages of maturity as they take on new financing. Thus, the historical trend for many mature companies is that leverage ratios rise as they balance their capital needs and investment opportunities against their existing debt levels.