What are the limitations of a D/E ratio?

D/E ratios need to be examined based on the industry of the company. Different industries have varied capital requirements because of their dynamic industry standards. Companies that have massive capex with a steady flow of revenue have higher than-average debt. Such companies have high D/E ratios, but it is justified by their consistent income flow. Another case is when a company issues preferred stock, but it is not an obligation to pay a preferred dividend. The D/E ratio will be inflated if preferred stock is included, making the company look risky.