What this calculator measures
Measures financial leverage by comparing total liabilities to shareholder equity.
Common use cases
Use this model when the inputs describe the same decision, period and customer or product scope.
- Compare interest-bearing debt with shareholders’ equity.
- Use the result with the recorded inputs: Total debt, Shareholders' equity.
- Compare multiple scenarios before making a finance decision.
Formula
Debt-to-equity = Total debt ÷ Shareholders’ equity
The result depends on the definitions and carrying values used.
Worked example
$300,000 debt divided by $150,000 equity gives a D/E ratio of 2.0.
How to interpret the result
Higher ratios indicate higher financial risk and reliance on debt financing.
Assumptions and limitations
- Equity reflects current market or book valuations accurately.