Debt-to-Equity Ratio
Accounting glossary · Understand, connect, apply
The debt-to-equity ratio compares a defined measure of debt with shareholders’ equity. It is used to examine financial leverage, but the definition of debt must be stated.
Example
Using interest-bearing debt of 120,000 and equity of 80,000 gives a debt-to-equity ratio of 1.5 times. A total-liabilities definition would give a different result if other liabilities exist.
Remember the difference
Book-value and market-value measures answer different questions. Negative or very small equity can make the ratio misleading. Compare like definitions, reporting dates and industries rather than assuming a universal safe level.
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Published 4 November 2026. Prepared with AI assistance; examples are fictional and simplified for learning.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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