If your firm has no debt at all, your current debt interest rates are the prime rate and you are awarded an AAA bond rating. As your debt-to-assets ratio increases, your current debt interest rates increase. Your bond rating slips one level for each additional 0.5% in short term interest. For example, if the prime rate is 10%, and your short term interest rate is 10.5%, then you would be given an AA bond rating instead of an AAA.