Debt to Equity Ratio
This is a fairly straightforward ratio. Both the variables required for this computation can be found in the Balance Sheet. It measures the amount of the total debt capital with respect to thetotal equity capital. A value of 1 on this ratio indicates an equal amount of debt and equity capital.Higher debt to equity (more than 1) indicates higher leverage and hence one needs to be careful.
Lower than 1 indicates a relatively bigger equity base with respect to the debt.The formula to calculate Debt to Equity ratio is:[Total Debt/Total Equity]
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