Fundamental Glossary / Debt & Financial Stability
Debt-to-Equity Ratio
Interest-bearing debt divided by shareholders' equity. It measures how much of the funding comes from lenders rather than owners.
Formula
Total debt / shareholders' equity. Some versions use only long-term debt, or net debt.
What it means
A ratio of 1 means lenders and owners have put up the same book amount. Higher means more of the capital is borrowed.
What is "high" depends on the business. A utility with contracted cash flow can carry more than a cyclical manufacturer. Compare inside the industry.
How to read it
A rising ratio means the balance sheet is getting more leveraged, unless equity is falling for an accounting reason. Pair it with interest cover so the stock of debt is not judged without the cash that services it.
What to watch
Off-balance-sheet leases, acceptances, and guarantees can leave the printed ratio too low. Net debt to EBITDA is often a better companion than debt to equity alone, because equity can be inflated by goodwill.
This note explains the term. It is not a research recommendation, a target price, or a comment on any security. Ratios and regulatory thresholds change; use the latest filing or circular for a live figure.