The debt-to-equity ratio (D/E) is a financial ratio that measures the relative amounts of debt and equity used to finance a company’s operations. It is calculated by dividing a company’s total debt by its total equity. A high debt-to-equity ratio indicates that a company is using more debt to finance its operations, while a low debt-to-equity ratio indicates that a company is using more equity to finance its operations.
The debt-to-equity ratio is an important financial metric because it can be used to assess a company’s financial leverage and risk. A high debt-to-equity ratio can increase a company’s financial risk, while a low debt-to-equity ratio can reduce a company’s financial risk. The debt-to-equity ratio can also be used to compare a company’s financial leverage to that of other companies in the same industry.