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 (shareholder value). You'll see this ratio pop up when analyzing a company's financial health—it tells you whether a business is financed mostly by borrowed money or by owner investment. A higher ratio means the company relies heavily on debt, which can be riskier if earnings drop. For example, if TechCorp has $100 million in debt and $200 million in equity, its ratio is 0.5, suggesting a balanced approach. Most investors use this to gauge financial stability before buying stock.