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Debt-to-equity ratio

A company's debt compared with its shareholders' equity.

FundamentalsIntermediate

Definition

A higher ratio means the business relies more on borrowing. What counts as high depends on the industry: utilities and banks carry much more debt than software companies.

Formula

Debt-to-equity = total debt / shareholders' equity

Watch out for

Compare against direct peers and look at whether earnings comfortably cover interest payments.

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