Debt-to-Equity Calculator
Calculate the debt-to-equity ratio from total liabilities and total shareholder equity.
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Debt-to-Equity Ratio
0.67
How the Debt-to-Equity Ratio Is Calculated
The debt-to-equity (D/E) ratio compares how much a business relies on debt versus shareholder equity to finance its assets. Enter total liabilities and total shareholder equity, both taken from the same balance sheet, to calculate it.
What Is a Healthy Debt-to-Equity Ratio?
There's no single healthy range that applies to every company — it varies significantly by industry. Capital-intensive industries like utilities, telecommunications, and manufacturing typically carry more debt relative to equity (D/E ratios of 1.5-2 or higher are common and normal), since they rely on debt to finance expensive infrastructure and equipment. Less capital-intensive industries, like many technology and services businesses, tend to run much lower D/E ratios, often below 1. Compare a company's ratio to others in the same industry rather than to a generic benchmark.
Example
A company with $400,000 in total liabilities and $600,000 in shareholder equity has a D/E ratio of 400,000 ÷ 600,000 = 0.67 — meaning it uses about 67 cents of debt for every dollar of equity financing.
Common Use Cases
- Assessing how leveraged a company is before investing or lending.
- Comparing a company's capital structure to industry peers.
- Tracking how a company's reliance on debt changes over time.
- Evaluating financial risk as part of broader due diligence.
FAQs
What does a high D/E ratio mean?
A high ratio means a company relies more heavily on debt than equity to finance its operations, which can amplify both returns and risk — heavier debt loads mean higher fixed interest obligations, regardless of how the business is performing.
What does a D/E ratio below 1 mean?
A ratio below 1 means a company has more equity than debt financing its assets, generally considered more conservative — though very low debt can also mean a company isn't using leverage to help fund growth.
Where do I find total liabilities and shareholder equity?
Both figures come from a company's balance sheet — total liabilities is usually the sum of current and long-term liabilities, and total shareholder equity (or stockholders' equity) is listed as its own section, typically at the bottom of the balance sheet.