Debt-to-Equity Ratio

The Debt-to-Equity Ratio measures how much money a company owes compared to how much it's actually worth to shareholders. You calculate it by dividing total debt by total equity (shareholders' ownership stake). You'll see this ratio when analyzing a company's financial health—it tells you whether the business is funded mainly by borrowed money or owner investment. A higher ratio means the company relies heavily on debt, which can be riskier during tough times. For example, if Company A has $100 million in debt and $200 million in equity, its ratio is 0.5, suggesting a balanced approach. Lower ratios generally signal a more stable company, though some debt is normal and healthy for growth.