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Review Of Debt-To-Equity Ratio References

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Understanding the Debt-to-Equity Ratio: A Guide Introduction The Debt-to-Equity (D/E) Ratio is a financial metric that measures a company's leverage by comparing its total liabilities to its shareholders' equity. This ratio provides insights into a company's financing structure, risk profile, and potential for growth. Understanding the D/E Ratio is crucial for investors, business owners, and financial analysts to make informed decisions about the company's financial health. Calculating the Debt-to-Equity Ratio To calculate the D/E Ratio, you need to divide a company's total liabilities by its shareholder's equity. The formula is as follows: D/E Ratio = Total Liabilities / Shareholder's Equity For example, if a company has $1 million in total liabilities and $500,000 in shareholder's equity, its D/E Ratio would be 2 (1,000,000/500,000). Interpreting the Debt-to-Equity Ratio A D/E Ratio of 1 indicates that a company has an equal amount of debt and e