Debt-to-Equity Ratio

The Debt-to-Equity Ratio measures how much money a company owes compared to how much it's actually worth to shareholders. You calculate it by dividing total debt by shareholders' equity (the company's assets minus liabilities). You'll see this ratio pop up when analyzing a company's financial health—it tells you whether management is using debt responsibly or taking on risky levels of borrowing. A higher ratio means the company relies heavily on loans; a lower ratio suggests it's more self-funded. For example, if TechCorp has $50 million in debt and $100 million in equity, its ratio is 0.5, indicating moderate leverage. Generally, investors prefer companies with balanced ratios, though what's "good" varies by industry.