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Financial health & leverage

Debt-to-Equity Ratio D/E

How much debt a company uses for every dollar of shareholder equity.

Part of the Financial Health & Risk course · Lesson 1 of 13
Formula
Total Debt / Shareholders' Equity

What it is

The debt-to-equity ratio compares what a company owes to lenders against what shareholders own. It is a core measure of financial leverage, meaning how much a company relies on borrowed money versus its own capital. A higher ratio means more reliance on debt.

Why it matters

Leverage can boost returns in good times but magnifies losses and raises the risk of distress when business slows. A D/E that looks high or low always needs context, because acceptable levels vary widely by industry: utilities and banks carry far more debt than software firms. Watch for definition differences too, since some sources use total liabilities and others use only interest-bearing debt, which changes the number a lot.

How it's calculated

Divide total debt (or total liabilities, depending on the definition) by total shareholders' equity, both taken from the balance sheet.

How Quintarthai uses it

D/E sits in the Leverage group of the Ratios tab on every company's deep-analysis page, and you can filter the North-American universe by it in the Stock Screener.

Cross-border note. Equity figures can differ between IFRS-reporting Canadian filers and US GAAP filers (for example in how leases or revaluations hit the balance sheet), so compare D/E carefully across borders.

FAQ

Is a higher debt-to-equity ratio always bad?
No. Moderate leverage is normal and can be efficient, and capital-intensive industries like utilities run high D/E by design. It becomes a concern when debt is high relative to peers and the company's cash flow cannot comfortably service it.
Does D/E use total liabilities or just borrowings?
It depends on the source. A strict version uses only interest-bearing debt (loans and bonds), while a broader version uses all total liabilities, which produces a higher ratio. Always check which definition a data provider uses before comparing companies.
Related terms
See Debt-to-Equity Ratio on a real company
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