MBATricks

Tips and Tricks about my MBA experience

Finance :: Leverage Ratio :: Debt-to-Equity Ratio

The Debt-to-Equity ratio is used to see the proportion of equity and debts the company is using to finance its assets.

 

Debt-to-Equity = Total Liabilities / Total Equity

 

The lower ratio the better as it means that the stockholders can reimburse their debts with its equities (safety cushion).

 

The Total Liabilities and the Total Equity are taken from the company’s Balance Sheet.

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