Debt to Equity Ratio

The Debt to Equity Ratio is a good indicator of the level of leverage used by a company.  The debt to equity ratio is even more stringent than the related Debt Ratio, since the debt to equity ratio only includes owner's equity in the calculation.  The debt to equity ratio is of special interest to equity holders in a company.

The calculation of the debt to equity ratio is as follows:

Total Liabilities / Owner's Equity

A lower debt to equity ratio indicates a safer investment to the potential owners of the company.