debt/equity ratio

(redirected from Debt-to-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 ?
The terms and conditions of the facility agreement contain customary covenants and undertakings including the requirement to maintain certain net debt-to-equity ratios.
This allows cooperatives to meet capital improvement needs through cash-out borrowing, while maintaining low debt-to-equity ratios.
NEW YORK-Even as they worked to cut their long-term debt, lower shareholder equity pushed up the number of home goods suppliers with higher debt-to-equity ratios for the first quarter.
Unlike conventional loans, which are tied to and determined by asset values, accounts receivable and debt-to-equity ratios, a subordinated loan is based on cash flow, earnings and management's track record.
They have promised to reduce debt-to-equity ratios to 200 per cent by the end of the year.
companies, and analyzing their debt-to-equity ratios, especially when the financing involves a so-called "double-dip" transaction.
It still remains to be seen whether SHFAs will be able to maintain debt-to-equity ratios at their current, unprecedented low levels.
Higher debt-to-equity ratios often serve as a red flag for lenders.
In addition to surveying builders on profitability, NAHB also studied such important financial indicators as owner compensation, cost of sales, expenses, asset-to-liability ratios, inventory turnover, and debt-to-equity ratios.
As illustrated in the example at right, use of the attribution rules in determining affiliated groups for earnings stripping purposes can result in a profitable corporation with normal debt-to-equity ratios having its interest expense deductions limited because its foreign parent has one or more less profitable or more leveraged operations in the United States.
Comparing fiscal 2004 results with the prior year, 35 SHFAs reported improvements in debt-to-equity ratios, 13 reported weakened ratios, and two agencies remained the same.
As nonfinancial industries have seen debt-to-equity ratios climb to 80 percent from 70 percent four years ago, the home furnishings segment has a ratio of 49.