Question
what is the debt to equity ratio formula
Answers
GPT-4o mini
The debt to equity ratio (D/E ratio) is a financial metric used to assess a company's financial leverage and its ability to meet its financial obligations. The formula for calculating the debt to equity ratio is:
\[
\text{Debt to Equity Ratio} = \frac{\text{Total Debt}}{\text{Total Equity}}
\]
Where:
- **Total Debt** includes all of a company's short-term and long-term liabilities.
- **Total Equity** is the total amount of shareholders' equity, which includes common stock, preferred stock, retained earnings, and additional paid-in capital.
A higher D/E ratio indicates greater leverage, meaning the company relies more on debt to finance its operations, while a lower ratio suggests that the company is less reliant on borrowed funds.
\[
\text{Debt to Equity Ratio} = \frac{\text{Total Debt}}{\text{Total Equity}}
\]
Where:
- **Total Debt** includes all of a company's short-term and long-term liabilities.
- **Total Equity** is the total amount of shareholders' equity, which includes common stock, preferred stock, retained earnings, and additional paid-in capital.
A higher D/E ratio indicates greater leverage, meaning the company relies more on debt to finance its operations, while a lower ratio suggests that the company is less reliant on borrowed funds.