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 ?
At the end of 2013/14, they had debts of more than Rs 1,000 crore, debt-equity ratios of more than three and interest coverage ratios of less than 1.
The aforesaid ratings draw strength from the experience of the promoters, long & satisfactory track record of the company, its established position as a mid-sized player in the road transportation & logistic segments, comfortable gearing and debt-equity ratios and stable outlook for the industry the company is engaged in.
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.
Thus, a firm maximizes its PLRS by making the growth rate in capital in each period equal to the expected rate of growth of its net worth plus some fraction of the difference between its actual and desired debt-equity ratios.
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.
However, Model 3 assumes that managers are forced to maximise the market value of debt plus equity by the existence of financial constraints, and this gives rise to an optimal determination of 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.