Debt To Equity Ratio is a term that refers to the ratio of liabilities to the equity of the enterprise.
The indicator is one of the balance sheet debt ratios (of long-term financial stability).
Calculation:
Debt to Equity Ratio = Total Liabilities / Shareholders’ Equity
The ratio reaches values from the interval <0, ∞>.
Use of the Debt to Equity Ratio in practice: This indicator is one of the key indicators for investors to measure enterprises among themselves because this ratio determines the degree of the financial risk that is related with business activities. The indicator is accompanied by the interest coverage (TIE) ratio.
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