If a company's return on assets is substantially lower than its cost of borrowing, then the common stockholders would normally want the company to have a relatively high debt/equity ratio.

Return on Assets

A measure of a company's profitability relative to its total assets, indicating how efficiently a company uses its assets to generate earnings.

Cost of Borrowing

The total charges, including interest and any other fees, that a borrower pays to secure and use borrowed money.