Debt-to-equity ratio

Debt-to-equity ratio (D / E ratio) is used to evaluate a company’s financial leverage and is calculated by dividing a company’s total liabilities by its shareholder equity. The D/E ratio is an important metric used in corporate finance. It is a measure of the degree to which a company is financing its operations through debt versus wholly owned funds. More specifically, it reflects the ability of shareholder equity to cover all outstanding debts in the event of a business downturn.

The formula for D / E ratio is:

D / E ratio = Total liabilities / Shareholder’s equity