What Is the Debt-to-Equity Ratio? (D/E Explained)

The debt-to-equity (D/E) ratio measures how much a company relies on borrowed money versus shareholders' own funds. It's one of the most important gauges of financial risk.

How it's calculated

D/E = total debt ÷ shareholders' equity. A ratio of 1 means debt and equity are equal; a ratio of 2 means the company has borrowed twice its net worth. The higher the ratio, the more leveraged — and generally the riskier — the company.

What counts as healthy

There's no single right number — it depends heavily on the industry. A software or FMCG company with little need for capital might run near zero debt, while a capital-intensive business (power, infrastructure, banks) naturally carries much more. The right comparison is against sector peers, not an absolute threshold.

Why leverage cuts both ways

Debt can amplify returns when business is good, because borrowed money funds growth shareholders didn't pay for. But the same leverage amplifies losses and interest obligations when business turns down — which is why a high D/E is a red flag in a downturn.

Finding the ratio

The debt-to-equity ratio is one of the valuation and health ratios served on every stock page and via the ratios endpoint. You can also screen the market for low-leverage companies with the screener.