# Quick Answer: What Is Debt Equity Ratio With Example?

Example: Using the balance sheet, the debt-to-equity ratio is calculated by dividing total liabilities by shareholders’ equity: For example if a company’s total liabilities are \$3,000 and its shareholders’ equity is \$2,500, then the debt-to-equity ratio is 1.2.

(Note: This ratio is not expressed in percentage terms.)

## What is the meaning of debt/equity ratio?

The debt-to-equity (D/E) ratio is calculated by dividing a company’s total liabilities by its shareholder equity. These numbers are available on the balance sheet of a company’s financial statements. The debt-to-equity ratio is a particular type of gearing ratio.13 Jun 2019

## What is a good debt to equity ratio?

A good debt to equity ratio is around 1 to 1.5. However, the ideal debt to equity ratio will vary depending on the industry because some industries use more debt financing than others.27 Nov 2018

## How do you find debt to equity ratio?

The debt to equity ratio is calculated by dividing total liabilities by total equity. The debt to equity ratio is considered a balance sheet ratio because all of the elements are reported on the balance sheet.

## What does a debt to equity ratio of less than 1 mean?

If the debt ratio is greater than 1, it would indicate that for every \$1 of asset, the company has more than \$1 of liabilities. A debt ratio below one means that for every \$1 of assets, the company has less than \$1 of liabilities, hence being technically “solvent (Links to an external site.)”.

## What does a debt to equity ratio of 2 mean?

A company’s debt-to-equity ratio, or D/E ratio, is a measure of the extent to which a company can cover its debt. In this example, a D/E of 2 also equals 200%. This means that for every \$1 of the company owned by shareholders, the business owes \$2 to creditors.

## How do you determine equity?

Total equity is the value left in the company after subtracting total liabilities from total assets. The formula to calculate total equity is Equity = Assets – Liabilities. If the resulting number is negative, there is no equity and the company is in the red.