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Debt to Equity Ratio

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Department:

Finance

Debt to Equity Ratio

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Calculation

Debt to Equity Ratio = Total Liabilities / Shareholder's Equity

DESCRIPTION

The Debt to Equity Ratio measures a company's financial leverage by comparing its total liabilities to its shareholder equity.

Purpose

The primary purpose of the Debt to Equity Ratio is to gauge a company's financial health and stability by assessing the proportion of equity and debt used to finance its assets.

Interpretation

Did you get it right

Optimal:
Indicates a balanced capital structure with a healthy mix of debt and equity, suggesting sustainable growth potential.
Alert:
May signal excessive reliance on debt, which could increase financial risk and potentially lead to solvency issues.
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06/15/2024 03:35:15 am