Total Debt-to-Equity

Total Debt-to-Equity is a Leverage Ratio that uses inputs only from the Liability side of the Balance Sheet. Calculates the level of Shareholder resources used in financing the Balance Sheet.

A Financial Ratio such as the Total Debt-to-Equity Ratio is a Leverage Ratio, thus a Risk Ratio. The Ratio measures the level of Gearing a Company is using to finance the Company’s Total Assets. Thus, how a Company’s capital structure is tilted either towards either Debt or Equity and is calculated by the following formular.

Total Debt-to-Equity Ratio = [(Total Debt + Fixed Payment Liabilities) / Shareholders’ Equity]

A Company’s reliance on Debt Financing will fluctuate over time, as will, the changing reliance between Short-Term and Long-Term Debt and Payments. Further, the level of Gearing employed will vary between Companies which are competitors in the same Sector.