Debt-to-Equity Ratio (D/E)
📈 Investing
Quick Definition
The Debt-to-Equity Ratio (D/E) is a financial metric used to measure a company's financial leverage by comparing its total liabilities to its shareholder equity.
Formula
Total Liabilities / Shareholder EquityExamples
- 1A company with $100 million in total liabilities and $50 million in shareholder equity has a D/E ratio of 2.0.
- 2An individual assessing different companies for investment might look at the D/E ratio to determine which company has a healthier balance between debt and equity.
- 3A business looking to take on new debt might calculate its D/E ratio to understand how much more debt it can sustainably handle.
- 4During economic downturns, analysts might scrutinize the D/E ratios of companies in vulnerable industries to predict their risk of bankruptcy.
Tags
debtequityfinancial-ratioleverageinvestment-analysis
Related Terms
Other terms you might find helpful
Balance Sheet
A balance sheet is a financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a snapshot of its financial condition.
Leverage Ratio
A leverage ratio is a financial metric used to assess a company's ability to meet its financial obligations with its available assets. It indicates the extent to which a business is using borrowed money.
Quick Info
Category:Investing
Difficulty:intermediate
Last Updated:6/18/2025