Debt to Equity Calculator
Analyze financial leverage and solvency with D/E ratio calculations
Calculate Debt to Equity Ratio
Select which values you know, and we'll calculate the rest
Total liabilities from balance sheet
Total equity from balance sheet
Assets = Debt + Equity
Debt / Equity ratio (e.g., 1.5)
Financial Leverage Analysis
Key Formulas
D/E Ratio: Total Debt / Shareholders' Equity = $850,000,000 / $375,000,000 = 2.267
Total Assets: Total Debt + Shareholders' Equity = $850,000,000 + $375,000,000 = $1,225,000,000
Debt Ratio: Total Debt / Total Assets = 69.39%
Equity Ratio: Shareholders' Equity / Total Assets = 30.61%
Capital Structure Breakdown
Key Insights
Example Calculations
Example 1: High Leverage Company (Company A)
Given: Total Debt = $850M, Shareholders' Equity = $375M
Calculation:
• D/E Ratio = $850M / $375M = 2.27
• Total Assets = $850M + $375M = $1,225M
• Debt Ratio = $850M / $1,225M = 69.4%
Result: High leverage (2.27) - aggressive, risky financing strategy
Example 2: Conservative Company (Company B)
Given: Total Debt = $42.5M, Shareholders' Equity = $126M
Calculation:
• D/E Ratio = $42.5M / $126M = 0.337
• Total Assets = $42.5M + $126M = $168.5M
• Debt Ratio = $42.5M / $168.5M = 25.2%
Result: Low leverage (0.337) - financially stable, conservative approach
Example 3: Calculate Equity from Assets & Debt (Company C)
Given: Total Assets = $146M, Total Debt = $83M
Calculation:
• Shareholders' Equity = $146M - $83M = $63M
• D/E Ratio = $83M / $63M = 1.32
• Debt Ratio = $83M / $146M = 56.8%
Result: Moderate-high leverage (1.32) - balanced but significant debt
D/E Ratio Benchmarks
Industry Average D/E Ratios
Note: "Normal" ratios vary significantly by industry. Capital-intensive industries typically have higher D/E ratios.
Quick Formulas
Total Debt / Shareholders' Equity
Total Assets - Total Debt
Total Debt + Shareholders' Equity
Total Debt / Total Assets
Analysis Tips
Compare with industry averages for context
Track D/E ratio trends over time
High D/E can amplify returns in good times
High D/E increases risk in downturns
Consider debt quality and maturity
Understanding Debt to Equity Ratio
What is the D/E Ratio?
The debt-to-equity (D/E) ratio is a financial leverage ratio that measures the proportion of debt and equity used to finance a company's assets. It shows how much debt a company uses relative to stockholders' equity. A D/E ratio of 1.5 means the company has $1.50 in debt for every $1.00 in equity.
Why D/E Ratio Matters
- •Indicates financial risk and leverage level
- •Shows capital structure and funding strategy
- •Helps investors assess solvency
- •Key metric for lending decisions
High vs Low D/E Ratio
High D/E Ratio (Above 2.0)
Pros:
- • Higher potential returns on equity
- • Tax benefits from interest deductions
- • Faster growth without diluting ownership
Cons:
- • Higher financial risk and volatility
- • Increased bankruptcy risk
- • Higher interest payments
Low D/E Ratio (Below 0.5)
Pros:
- • Greater financial stability
- • Lower bankruptcy risk
- • More attractive to conservative investors
Cons:
- • Limited growth potential
- • Not maximizing leverage benefits
- • Potentially lower ROE
Interpreting D/E Ratio by Context
Industry Context
Capital-intensive industries (utilities, oil & gas) typically have higher D/E ratios (1.5-2.5). Technology and service companies usually have lower ratios (0.3-0.7).
Growth Stage
Start-ups and growth companies may have higher D/E ratios as they leverage debt for expansion. Mature companies often maintain moderate ratios for stability.
Economic Conditions
Low interest rate environments encourage higher leverage. During recessions, companies with high D/E ratios face greater distress risk.
Related Financial Metrics
Debt Ratio
Total Debt / Total Assets
Shows percentage of assets financed by debt
Equity Ratio
Shareholders' Equity / Total Assets
Shows percentage of assets financed by equity
Interest Coverage Ratio
EBIT / Interest Expense
Measures ability to pay interest obligations
Times Interest Earned
Operating Income / Interest Expense
Similar to interest coverage ratio