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Financial Empowerment

Calculating Debt-to-Equity Ratio


The debt-to-equity ratio is an easy calculation that reveals how much a business has been funded from loans and investments from shareholders.

Calculate your company’s debt-to-equity ratio as follows:

Debt-to-equity ratio = debt / shareholder’s equity

This ratio helps identify companies that are highly leveraged, meaning they have funded their business with substantially more debt than equity. Lenders typically favor businesses with debt-to-equity ratios of 2:1, however their decisions are also based on a borrower’s industry, revenue stability and profitability outlook.

Next:
Capitalization Table Key Ratios Investors Care About
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