Debt/Equity Ratio is a debt ratio used to measure a company’s financial leverage.
Debt to Equity = Long-Term Debt/Shareholders’ Equity
For example, suppose a company has a total shareholder value of ₹300,000 and has ₹600,000 in liabilities. Its debt/equity ratio is then 2.00 (₹600,000 / ₹300,000), or 200%, indicating that the company has been heavily taking on debt and thus has high risk. Conversely, if it has a shareholder value of ₹600,000 and ₹300,000 in liabilities, the company’s D/E ratio is 0.5 (₹300,000 / ₹600,000), or 50.00%, indicating that the company has taken on relatively little debt and thus has low risk.