Definition How much a business relies on borrowing compared with money from its owners.
Example €1m of debt with €2m of equity gives a debt-to-equity ratio of 0.5.
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Why it matters It shows how much financial risk a business is carrying.
Where it is used Lender reviews, investor analysis and financial reports.
How to calculate it Total debt ÷ shareholders’ equity
Worked example €1m of debt with €2m of equity gives a debt-to-equity ratio of 0.5.
