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Debt to Equity




This old standard is commonly used to get a feel for indebtedness, particularly in comparison with the rest of an industry.

How to calculate debt to equity? The calculation is simple:

Total long-term debt divided by equity.


Additional Comments:

As a consumer, you know such a debt to equity ratio well below 1 percent is healthy, and so it is for most businesses too. Debt-free companies - just like debt-free consumers - come out ahead more often.

Related Terms:

Common Stock Ratio
The percentage that common stockholders' equity reduced by intangible assets bears to total tangible capitalization (the ...

Financial Leverage
Financial leverage relates a company's long-term debt and preferred stock to the company's common equity. ...

Note
A short-term debt instrument. They normally mature in or less than five years. ...





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