Meaning & use

debt to equity ratio

noun·Advancedfinance

Last updated

UK/ˌdet tə ˈekwɪti ˌreɪʃiəʊ/
US/ˌdet tə ˈekwəti ˌreɪʃoʊ/

Meaning

  1. 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 ________.

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