Question: What does the debt to equity ratio show, and how is it calculated?

Question: What does the debt to equity ratio show, and how is it calculated?

Expert Solution

Step 1: Definition of debt

Debt is the amount that a company owes. Debt includes notes payable, loans, etc.

Step 2: Debt-equity ratio

The debt-equity ratio is a ratio that shows the relationship between total liabilities and total equity. The debt-equity ratio is calculated by dividing total liabilities by total equity.

Total liabilities mean the amount that consists of current liabilities and long-term liabilities.

Sahil Dangi answered 2 years ago

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