debt/equity ratio

Also found in: Acronyms.

Debt/equity ratio

Indicator of financial leverage. Compares assets provided by creditors to assets provided by shareholders. Determined by dividing long-term debt by common stockholder equity.

Debt/Equity Ratio

In risk analysis, a way to determine a company's leverage. The ratio is calculated by taking the company's long-term debt and dividing it by the value of its common stock. Put graphically:

Debt/equity ratio = Long-term debt / Common stock

The greater a company's leverage, the higher the ratio. Generally, companies with higher ratios are thought to be more risky because they have more liabilities and less equity. See also: Long-Term Debt/Capitalization Ratio.

debt/equity ratio

The ratio of mortgage debt to the owner's equity in the property.Typical home mortgage lenders require a debt/equity ratio of 80 percent—meaning they will loan up to 80 percent of the value of the home.Higher ratios can be obtained by purchasing private mortgage insurance. Commercial lenders have varying requirements depending on particular market circumstances at the time.

References in periodicals archive ?
Adjusting for debt/equity ratios of lx to 2x, this would suggest equity losses of 4.
Whether an instrument like mandatorily redeemable preferred stock is classified as a liability or as equity obviously affects reported amounts of liabilities and equity and related summary indicators, such as the debt/equity ratio and the asset/equity ratio.
30, 1996, FINOVA's on-balance sheet debt/equity ratio had reached 6.
The terms of the support agreement, which include a maximum debt/equity ratio for the finance operations, an intercompany line of credit and majority ownership provision, cannot be terminated before July 31, 1995, without the reaffirmation of Financial's credit ratings by all credit rating agencies.
Convenants on existing debt often stipulate that the debt/equity ratio may not exceed a certain level.
94 and a debt/equity ratio of 0, bettering this screen's parameters of greater than 1.
Strong balance sheet with Group's net debt/equity ratio down from 55 percent to 40 percent.
Maintenance of a 50-50 debt/equity ratio remains a goal.