What Is Debt-to-Equity Ratio?
What Is Debt-to-Equity Ratio? The debt-to-equity (D/E) ratio, which measures a company's financial performance, is determined by dividing its total liabilities by the value of its equity holders. The D/E ratio is a crucial indicator in corporate finance. It determines how much debt a business is using to fund operations as opposed to using cash on hand. How to calculate Debt-to-Equity Ratio? The information needed to compute the D/E ratio can be found on the balance sheet of a publicly listed company. Subtracting the value of liabilities from total assets on the balance sheet yields the figure for shareholder equity, which is a rearranged form of the balance sheet equation: Assets=Liabilities + Shareholder Equity These balance sheet categories may include items that are not generally considered debt or equity in the traditional sense of a loan or an asset. Because the ratio can be affected by retained earnings or losses, intangible assets, and pension plan adjust