This paper examines the relative importance of factors in the leverage decisions of publicly traded American firms from 1950 to 2003. The most reliable factors are median industry leverage (+ effect on leverage), market-to-book ratio (-), tangibility (+), profits (-), log of assets (+), and expected inflation (+). Industry subsumes a number of smaller effects. The empirical evidence seems reasonably consistent with some versions of the tradeoff theory of capital structure. The study finds that six factors account for more than 29% of the variation in leverage, while the remaining factors only add a further 2%. These six factors are referred to as "core factors" and include industry median leverage, tangibility, profits, firm size, market-to-book ratio, and expected inflation. The core factors have consistent signs and statistical significance across many alternative treatments of the data. The remaining factors are not nearly as consistent. The study also finds that the six core factors provide a more powerful account of a market-based definition of leverage than a book-based definition. The core factors are consistent with the tradeoff theory, which suggests that firms balance the tax benefits of debt against the deadweight costs of bankruptcy. However, the sign on profits is inconsistent with the static tradeoff theory but is consistent with dynamic tradeoff models. The study also finds that the pecking order theory has other problems and that the market timing theory does not make any predictions for many of the patterns in the data that are accounted for by the tradeoff theory. The study concludes that the six core factors are reliable and important for predicting leverage. The findings suggest that the tradeoff theory is a reasonable explanation for the observed patterns in leverage decisions. The study also highlights the importance of considering the effects of macroeconomic factors such as expected inflation and market-to-book ratio in understanding leverage decisions. The study provides a comprehensive analysis of the factors that influence leverage decisions and offers insights into the theories that explain these decisions.This paper examines the relative importance of factors in the leverage decisions of publicly traded American firms from 1950 to 2003. The most reliable factors are median industry leverage (+ effect on leverage), market-to-book ratio (-), tangibility (+), profits (-), log of assets (+), and expected inflation (+). Industry subsumes a number of smaller effects. The empirical evidence seems reasonably consistent with some versions of the tradeoff theory of capital structure. The study finds that six factors account for more than 29% of the variation in leverage, while the remaining factors only add a further 2%. These six factors are referred to as "core factors" and include industry median leverage, tangibility, profits, firm size, market-to-book ratio, and expected inflation. The core factors have consistent signs and statistical significance across many alternative treatments of the data. The remaining factors are not nearly as consistent. The study also finds that the six core factors provide a more powerful account of a market-based definition of leverage than a book-based definition. The core factors are consistent with the tradeoff theory, which suggests that firms balance the tax benefits of debt against the deadweight costs of bankruptcy. However, the sign on profits is inconsistent with the static tradeoff theory but is consistent with dynamic tradeoff models. The study also finds that the pecking order theory has other problems and that the market timing theory does not make any predictions for many of the patterns in the data that are accounted for by the tradeoff theory. The study concludes that the six core factors are reliable and important for predicting leverage. The findings suggest that the tradeoff theory is a reasonable explanation for the observed patterns in leverage decisions. The study also highlights the importance of considering the effects of macroeconomic factors such as expected inflation and market-to-book ratio in understanding leverage decisions. The study provides a comprehensive analysis of the factors that influence leverage decisions and offers insights into the theories that explain these decisions.