IN PLAIN ENGLISH
How much the company relies on borrowed money versus money from shareholders. Too much debt can be risky.
FULL DEFINITION
A ratio used to evaluate a company's financial leverage, calculated by dividing its total debt by its shareholders' equity.
EXAMPLE
Ratio of 0.5 means for every £1 of shareholder money, they have 50p of debt. Ratio of 2.0 means £2 of debt for every £1 of equity (Riskier!).
HOW IT'S CALCULATED
Debt-to-Equity = total debt ÷ shareholders' equity. Supplied by the market data provider as a percentage from the most recent balance sheet it has, and divided by 100 by the app, so 1.20 means £1.20 of debt for every £1 of equity. Total debt means borrowings, and the provider's figure can include lease liabilities; it is not all liabilities, so money owed to suppliers is left out. Shows N/A when the provider has no figure, which is the case for companies with negative equity and for most banks.
Educational content only. It is not personal financial advice.