debt/equity ratio

(redirected from Debt-Equity Ratios)

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 ?
Several traditional financial ratios (the current ratio and quick ratios, days' sales in inventory, debt and debt-equity ratios, return on assets, and Altman Z-score) were then calculated based on the equations summarized below.
While there is no settled rule regarding a specific range, acceptable debt-equity ratios in recent cases have varied from 1.
Some preparations can be done in advance, for example, looking at debt-equity ratios, interest cover and whether or not the cash generated by the business will be sufficient to service and ultimately repay the debt.
Effect on debt: Debt-equity ratios increased by a modest amount for the sample.
In the corporate sector major progress has been made in reducing debt-equity ratios.
The landlords who have been able to do this have satisfactory debt-equity ratios.
Corporate debt-equity ratios in Korea, which declined following liberalization, returned to its mid-1970s level five years after reform.
In contrast, debt-equity ratios based on market values increased very little, as higher stock prices offset much of the growth in corporate indebtedness.
because many corporations with what can fairly be called typical capital structures have debt-equity ratios below the safe harbor ratio in the bill.
This would have a favorable impact on debt-equity ratios.
Aggregate book value debt-equity ratios, based on balance sheet data for nonfinancial firms, have increased sharply in the 1980s, moving outside their range in recent decades, although measures based on market values have risen more modestly.
1955), where the court held that, although examination of debt-equity ratios may be a relevant inquiry, it is not of primary importance in deciding whether an advance is debt or equity with a debt-equity ratio of almost 300:1.