Debt To Equity Ratio
The Debt to Equity Ratio (D/E) is a financial metric that helps assess a company's financial leverage by comparing its total liabilities to shareholders' equity. It is calculated as: Debt to Equity Ratio (D/E) = Total Liabilities / Shareholders' Equity. A high D/E ratio indicates that the company is heavily reliant on debt to finance its operations, which could imply higher financial risk. Conversely, a low D/E ratio suggests the company is operating with less debt and may be less risky, but it could also mean that the company is under-leveraged and potentially not taking advantage of growth opportunities. This ratio is mainly used for comparative analysis within the same sector, as the ideal debt ratio can vary significantly across industries.
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