debt-to-equity ratio

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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-to-equity ratio

The relationship between long-term funds provided by creditors and funds provided by owners. A firm's debt-to-equity ratio is calculated by dividing long-term debt by owners' equity. Both items are shown on the balance sheet. A high debt-to-equity ratio, which indicates very aggressive financing or a history of large losses, results in very volatile earnings. A low debt-to-equity ratio, which indicates conservative financing and low risk, results in fewer possibilities of large losses or large gains in earnings.

Debt-to-equity ratio.

A company's debt-to-equity ratio indicates the extent to which the company is leveraged, or financed by credit. A higher ratio is a sign of greater leverage.

You find a company's debt-to-equity ratio by dividing its total long-term debt by its total assets minus its total debt. You can find these figures in the company's income statement, which is provided in its annual report.

Average ratios vary significantly from one industry to another, so what is high for one company may be normal for another company in a different industry.

>From an investor's perspective, the higher the ratio, the greater the risk you take in investing in the company. But your potential return may be greater as well if the company uses the debt to expand its sales and earnings.

References in periodicals archive ?
Rockwell has a higher debt-to-equity ratio of 1.2 times as compared to Shang, which has a conservative low debt-to-equity ratio of only 0.2 times.
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The SEC argues that Lemelson intentionally or recklessly misstated Ligand's debt-to-equity ratio and that the statement is material because it goes to the heart of Ligand's overall financial viability and supported Lemelson's argument that Ligand's stock was worth $0.
The investment provides SAFE with new capital to pursue approximately $750M of new ground leases assuming SAFE's targeted two-to-one debt-to-equity ratio. iStar's investment is structured as a purchase of 12.5 million limited partnership units in SAFE's operating partnership at a price of $20.00 per unit.
Similarly, the RLT's debt-to-equity ratio has remained very conservative.
We expect growth to exceed internal capital generation, measured by the ratio of net income less dividends and net share repurchases to prior-period equity, in the near to medium term, which may push leverage up from a debt-to-equity ratio of 3.5x at end-2017.
Further gains to industry were achieved due to the economies of scale, improvement in cost efficiency, and a decline in the debt-to-equity ratio.
SB Equities said that, GT Capital has total debt of R91.13 billion with a debt-to-equity ratio of 0.52x as of the end of 2017.
Lucky Power Project is being financed through debt-to-equity ratio of 75:25.