Debt-to-Equity Ratio

The Debt-to-Equity Ratio (D/E) is a financial leverage ratio that compares a company's total liabilities to its shareholder equity. It is a measure of the degree to which a company is financing its operations through debt versus wholly-owned funds. In this formula, total debt refers to the sum of the company's liabilities and total equity is the value of the shareholders' equity. This ratio is significant in understanding the financial structure of a company. A higher D/E ratio implies more creditor financing (debt) relative to investor financing (equity), which can indicate higher financial risk. It is widely used by investors and analysts to gauge the risk level of a company's financial structure.