Debt to Equity Ratio

Online Calculators for Business & Investment

Debt to Equity Ratio

The Debt to Equity Ratio is another leverage ratio within accofina. Similar to the debt ratio, it can be used as a risk measure and strategy measure.

It is used as a risk measure because the equity figure used in the calculation incorporates assets minus liabilities and therefore it can measure the level of debt (the liabilities figure used in the calculation) against the current level of equity (assets minus liabilities) thus giving a result of assets available to cover the debt, even if it is a little twisted.

It is also widely used as a strategy measure. This is because it reflects how aggressive the business has been in its debt policy. It measures the use of debt to finance the business against the use of stockholder equity to finance the business. It is termed ‘aggressive’ as a business may use outside debt finance to ‘leverage’ or ‘speed up’ their growth instead of relying upon stockholders & retained earnings (equity) to finance future growth of the business.

The result is expressed as a percentage: A figure of 20% means that for every dollar of stockholder funds (equity) there are 20 cents of liabilities.Expressed another way, for all assets that have been funded in the business by either debt or equity (the two ways to fund a business), the proportion of debt is 20% to the level of equity.

Debt to Equity Ratio Calculator

The calculator asks for:
Liabilities, which is found on the balance sheet.
Equity, which is also found on the balance sheet.

Liabilities ($):

Equity ($):

Debt to Equity Ratio (%):

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