Debt-to-equity ratio
#07GUIDING QUESTION
How many euros of debt do you have for each euro of equity?
Dependence on creditors vs. equity.
01.What it is
Relationship between total debt and equity. It indicates financial autonomy.
02.Component masses
- Total liabilities
- Equity
03.Formula
MAIN FORMULA
Debt-to-equity ratio: Total liabilities ÷ Equity
04.Interpretation
- = 1 → as much debt as equity.
- > 1 → more debt than equity.
- < 1 → equity prevails.
05.Related to
- Debt ratio
- Financial autonomy
- ROE