Accounting
Intermediate

Debt-to-Equity Ratio

Measures financial leverage by comparing borrowed funds to owner-supplied funds.

Formula

D/E=Total DebtTotal EquityD/E = \dfrac{Total\ Debt}{Total\ Equity}

Variables

D/EDebt-to-equity ratio
Total DebtAll liabilities
Total EquityShareholder equity

Example

Debt $300k / equity $200k = 1.5

Did You Know?

Higher leverage magnifies both gains and losses — a key reason banks watch this ratio closely.

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