Debt-to-Equity Ratio Calculator

The Debt-to-Equity (D/E) Ratio is a financial leverage ratio that measures the proportion of debt a company has in relation to its equity. It is used to assess the financial risk of a company.

Debt-to-Equity Ratio Formula:

D/E Ratio = Total Debt / Total Equity

Example Calculation:

Let’s say a company has the following financials:

Total Debt = $500,000
Total Equity = $1,000,000

Using the formula, the Debt-to-Equity Ratio is:

D/E Ratio = $500,000 / $1,000,000 = 0.5

This means that for every dollar of equity, the company has 50 cents of debt.

Interpretation of the Ratio

The Debt-to-Equity Ratio provides insights into the financial structure of a company:

Ratio = 1: The company has equal debt and equity.
Ratio > 1: The company has more debt than equity, which may imply higher financial risk.
Ratio < 1: The company has more equity than debt, indicating lower financial risk.