Definitions for "Debt-to-equity ratio"
simply calculated by dividing debt by shareholder equity. This is a measure of relative financial leverage. Overly leveraged companies are considerably riskier than minimal debt companies because the cost of debt makes earnings more volatile, and excessive debt can sometimes cause bankruptcy when business conditions deteriorate.
The proportion of debt to equity in a firm's financial structure.
1. Total liabilities divided by total shareholders' equity. This shows to what extent owner's equity can cushion creditors' claim in the event of liquidation. Usually called Debt Ratio. 2. Total long-term debt divided by total shareholders' equity. This is a measure of Leverage-the use of borrowed money to enhance the return on owners' equity.