Debt-to-equity ratio

Definition

The debt-to-equity ratio is a financial metric that compares a company's total liabilities to its shareholder equity, indicating the balance between debt financing and equity financing used by a company. It provides insight into how much of the company is financed by debt compared to what is financed by investors' equity.

Related terms

Total Liabilities: Represents all the money that a company owes to external parties, including loans, bonds payable, and accounts payable.

Shareholder Equity: The residual interest in the assets of a corporation that remains after deducting its liabilities; essentially what would be left for shareholders if all assets were liquidated and all debts paid.

Financial Leverage:

A measure of how much a company uses borrowed funds to finance its operations, with higher leverage indicating greater use of debt relative to equity