To have the better understanding regarding debt to equity ratio kindly go through the explanation given below.
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The Debt/Equity ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity.
Formula to calculate Debt/Equity Ratio
Total Liability -Shareholder's Equity
For example :
suppose a company has a total shareholder value of Rs. 120,000 and has Rs 420,000 in liablities Its debt/equity ratio is then 3.5 (4,20,000/1,20,000) or 350%, indicating that the company has been heavily taking on debt and thus has high risk. Conversely, if it has a shareholder value of RS 420,000 and Rs. 120,000 in liabilities, the company’s D/E ratio is 0.2857(1,20,000 / 420,000), or 28.57%, indicating that the company has taken on relatively little debt and thus has low risk
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated by dividing a company's total liabilities by its stockholders' equity. The Debt/Equity ratio indicates how much debt a company is using to finance its assets relative to the amount of value represented in shareholders' equity.
Formula to calculate Debt/Equity Ratio
Total Liability -Shareholder's Equity
For example :
suppose a company has a total shareholder value of Rs. 120,000 and has Rs 420,000 in liablities Its debt/equity ratio is then 3.5 (4,20,000/1,20,000) or 350%, indicating that the company has been heavily taking on debt and thus has high risk. Conversely, if it has a shareholder value of RS 420,000 and Rs. 120,000 in liabilities, the company’s D/E ratio is 0.2857(1,20,000 / 420,000), or 28.57%, indicating that the company has taken on relatively little debt and thus has low risk
what should be understand be different level of Debt/Equity
Regards
Mukesh Kapri
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