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 ?
An increase in the debt/equity ratio may also affect the price of a company's stock.
In 2005 and 2006, the company took bank loans to invest over SEK1bn in expanded production of own energy and as a result its debt/equity ratio rose above the defined target.
Also, the company now expects return on capital employed to be over 20% and the net debt/equity ratio to be less that one.
As financial standards Alfa Laval states that debt/equity ratio shall be below 100 percent, cash-flow from current operations 11 - 14 percent of sales and investments approximately 2.
According to Fitch's estimations, Kirin's adjusted net debt/operating EBITDAR and debt/equity ratios were around 2.
One of the key advantages of subordinated debt is that, in most cases, bankers will treat the remaining portion of sub-debt as equity when calculating debt/equity ratios.
They want to know what our company's portfolio is with respect to operating performance, debt/equity ratios, product positioning, customer diversity, prospective mergers and acquisitions, cost controls, and capital investment.
Its objective is long-term growth and it invests primarily in the securities of companies believed to have P/E and debt/equity ratios that are equal to or lower than the average for companies in the same industry.
Also, the fund invests in the securities of companies believed to have P/E and debt/equity ratios that are equal to or lower than the average for companies in the same industry.