Debt to Equity Ratio

The Debt-to-Equity Ratio (sometimes called the leverage ratio) is a measure of how much of a company's assets are funded through borrowing or financing (debt) and how much through equity.

The calculation for the Debt-to-Equity Ratio is usually expressed as:

• Liabilities (usually long-term liabilities only)
  
• Divided by Equity (shareholder's equity.

If the Debt-to-Equity Ratio is greater than 1, the assets of the company are purchased primarily through financing/borrowing. A business with a high debt-to-equity ratio is said to be "highly leveraged."

The debt-to-equity ratio of a business is sometimes referred to as the business's "capital structure."