Debt-to-Equity Ratio Calculator
Evaluate financial leverage by comparing total liabilities to shareholder equity. Ratios above 1 indicate more debt than equity.
Simplified financial ratio; consult financial statements for full analysis.
Examples
- $150,000 liabilities / $100,000 equity ⇒ 1.5
- $80,000 liabilities / $200,000 equity ⇒ 0.4
- $500,000 liabilities / $250,000 equity ⇒ 2.0
FAQ
What is a good debt-to-equity ratio?
It varies by industry, but lower ratios imply less risk.
Can the ratio be negative?
Yes, if equity is negative the ratio becomes negative.
Does this include short-term debt?
Yes, total liabilities typically include both short- and long-term debt.
Why track this ratio?
It helps evaluate financial leverage and risk.
What if equity is zero?
The ratio becomes undefined because you cannot divide by zero.
Additional Information
- A ratio above 1 means the company relies more on debt financing than equity.
- Industry norms vary; capital-intensive sectors may operate with higher ratios.
- Use consistent currency units for liabilities and equity.