Financial Analysis – Debt/Equity Ratio (DER or D/E)

Debt/Equity (D/E) Ratio, calculated :

  • by dividing a company’s Total Liabilities (STL + LTL)
  • by its stockholders’ Equity (EQ),

This debt ratio used to measure a company’s financial leverage.

The DER indicates how much Debt a company is using to finance its Assets relative to the value of shareholders’ Equity.

The formula for calculating DER is:

The result can be expressed either as a number or as a percentage. Preferably DER ratio is 0.5 and below.

For DER is usually using abbr. D/E ratio.