Debt to Equity Ratio

Relates the amount of company debt to owners equity, a basic measure of financial risk to stockholders.

The Debt to Equity Ratio compares the company's dollar amount owed to creditors (Total Liabilities) to the dollar amount supplied by investors of the company (Total Stockholders Equity).

The higher the amount of Total Liabilities, the more risky this company becomes. If the company went bankrupt, the creditors would be paid before the stockholders. Plus the more equity the stockholder's provide, the better protected the creditors are and the more attractive the financial position of this company becomes.

Tags: Financial Ratio