Meaning
Debt to equity compares company debt with shareholders' equity.
Formula
Total debt / shareholders' equity
Practical reading
Very high values can increase risk, especially when cash flow is weak.
Calculation detail
Debt to equity = interest-bearing debt / shareholders' equity. Check the data-provider definition because some versions include lease liabilities or all liabilities, while others use only borrowings.
What to check
Read it alongside interest coverage, free cash flow and debt maturity dates. A higher ratio can be normal for regulated utilities or banks, but less so for cyclical firms with volatile cash flow.
Limits and caveats
Negative or very small equity makes the ratio unstable; in that case absolute debt and liquidity can be more useful.