Meaning & use
debt to equity ratio
Last updated
Meaning
nouncountablefinance
A financial ratio that compares a company's total debt to its shareholders' equity.
Grammar: Countable; often used with 'a' or in the plural. Typically followed by 'of' when specifying the company.
Patterns
- debt to equity ratio of a company
- calculate the debt to equity ratio
A debt to equity ratio of 1.5 means the company has $1.50 of debt for every $1 of equity.
Investors use the debt to equity ratio to gauge a company's financial leverage.
The debt to equity ratio can vary widely across industries.
Common combinations
- high debt to equity ratio
- A high debt to equity ratio may signal that a company is overleveraged.
- calculate the debt to equity ratio
- To calculate the debt to equity ratio, divide total liabilities by shareholders' equity.
- debt to equity ratio of
- The debt to equity ratio of the firm is 0.8.
Synonyms and how they differ
- D/E ratio
- D/E ratio is the common abbreviation for debt to equity ratio.
Commonly confused: debt to equity ratio or debt to capitalization ratio?
debt to equity ratio vs debt to capitalization ratio
Debt to capitalization ratio compares debt to total capital, while debt to equity ratio compares debt to equity only.
Practice
The debt to equity ratio is calculated by dividing total debt by ________.
Choose one answer.
The ratio's denominator is shareholders' equity. Total assets, net income, and cash flow are not used in this ratio.
Make it your own
Write a sentence using “debt to equity ratio”, then check it and compare it with the examples above.