Debt-to-Equity Ratio Calculator

What is the Debt-to-Equity Ratio? This financial metric compares a company's total debt to its total shareholders' equity, providing insight into the financial leverage and risk of the business.

Interpretation:

• Ratio < 1.0: Company has more equity than debt, suggesting a financially conservative position.
• Ratio = 1.0: Company has equal amounts of debt and equity.
• Ratio > 1.0: Company has more debt than equity, indicating higher financial leverage and risk.

Industry Considerations: Optimal debt-to-equity ratios vary by industry. Capital-intensive industries like manufacturing or utilities typically have higher ratios than service-based businesses.

Strategic Implications: While higher debt can amplify returns during good times (financial leverage), it also increases risk during downturns. A balanced approach to financing that aligns with your business risk profile and industry norms is generally recommended.