Sunday, September 24th 2017

Debt to Equity Ratio


Debt to Equity Ratio Meaning:
A ratio arrived at by dividing the total liabilities of a company by the dollar value of total assets minus total liabilities. A high ratio indicates that the company is heavily in debt relative to the value of its assets. Itís regarded as an important metric for assessing the financial stability of a company and consequently how good of an investment it might be.

Debt to Equity Ratio Example:
Company A has total liabilities of $3,000, and total assets of $15,000. Itís debt to equity ratio is therefore 3,000 ų (15,000 Ė 3,000), or 0.25. This is a low debt to equity ratio, so the company might be seen as a safe investment.
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