D/E — Debt-to-Equity Ratio
DeepScreen explains D/E as follows: Debt-to-equity measures financial leverage. A lower value usually means a more conservative balance sheet, but normal leverage varies sharply by industry.
Formula
Total debt or liabilities ÷ shareholder equity
Illustrative example
Interest-bearing debt of 60 million divided by equity of 100 million gives debt-to-equity of 0.6x. A liabilities-to-equity calculation uses a different numerator and must be labeled separately.
Educational example; these are not reported company figures.
How to interpret it
- Rising debt can increase both returns and downside risk.
- Judge debt alongside interest coverage and cash flow.
Limitations
- Banks use leverage as part of their business model.
- Lease accounting can change reported debt.
Frequently asked questions
- What is D/E?
- Debt-to-equity measures financial leverage. A lower value usually means a more conservative balance sheet, but normal leverage varies sharply by industry.
- How is D/E calculated?
- Total debt or liabilities ÷ shareholder equity
- What should investors watch for with D/E?
- Banks use leverage as part of their business model. Lease accounting can change reported debt.
. Educational analytical content, not investment advice.