Debt to Equity Ratio Calculator

Our powerful debt to equity ratio calculator is used to assess a company’s total liabilities of a business to its shareholder equity, providing insights into the company’s capital structure and risk profile.

Consider a company with $500,000 in total debt and $250,000 in shareholder equity.

Using the calculator, we’d find:

Debt to Equity Ratio = $500,000 / $250,000 = 2

This result indicates that for every dollar of equity, the company has $2 of debt.

Total Liabilities	Shareholder’s Equity	Debt to Equity Ratio
$500,000	$250,000	2.00
$1,000,000	$800,000	1.25
$200,000	$300,000	0.67
$1,500,000	$500,000	3.00
$750,000	$1,000,000	0.75
$2,000,000	$1,500,000	1.33
$1,200,000	$600,000	2.00
$900,000	1,100,000	0.82
400,000	600,000	0.67
3,500,000	1,500,000	2.33
1,800,000	900,000	2.00
2,200,000	1,800,000	1.22
600,000	400,000	1.50
2,800,000	700,000	4.00
500,000	900,000	0.56

Debt to Equity Ratio Formula

The formula for calculating the debt to equity ratio is straightforward:

Debt to Equity Ratio = Total Liabilities / Shareholder's Equity

A tech startup with $1,000,000 in total liabilities and $800,000 in shareholder’s equity:

Debt to Equity Ratio = $1,000,000 / $800,000 = 1.25

This ratio suggests that the startup has $1.25 of debt for every dollar of equity.

How do you calculate the debt-to-equity ratio?

Gather financial data: Collect information on total liabilities and shareholder’s equity from the company’s balance sheet.

Sum up liabilities: Add all short-term and long-term debt obligations.

Determine shareholder’s equity: This is typically listed as a separate line item on the balance sheet.

Apply the formula: Divide total liabilities by shareholder’s equity.

Let’s walk through an example:

Imagine a retail company with:

Short-term debt: $200,000
Long-term debt: $800,000
Shareholder’s equity: $1,500,000
Total liabilities = $200,000 + $800,000 = $1,000,000
Debt to Equity Ratio = $1,000,000 / $1,500,000 = 0.67

This ratio indicates that the company has $0.67 of debt for every dollar of equity, suggesting a relatively conservative financial structure.

What is a good ratio of debt-to-equity?

0.5 to 1.5: Generally considered healthy for established companies
Below 0.5: May indicate underutilization of leverage
Above 2: Often seen as risky, especially for mature businesses

Determining a “good” debt-to-equity ratio depends on various factors, including industry norms, company size, and growth stage.

For instance, a manufacturing company with a debt-to-equity ratio of 1.2 might be considered to have a healthy financial structure, as it balances the use of debt financing with equity.

A tech startup might have a higher ratio, say 3, which could be acceptable given its growth potential and industry dynamics.

How do you convert debt-to-equity ratio to debt ratio?

The debt ratio is another important financial metric that compares total liabilities to total assets.

Calculate the debt-to-equity ratio

Use the formula: Debt Ratio = Debt-to-Equity Ratio / (1 + Debt-to-Equity Ratio)

Let’s say a company has a debt-to-equity ratio of 1.5.

Debt Ratio = 1.5 / (1 + 1.5) = 1.5 / 2.5 = 0.6

This means 60% of the company’s assets are financed by debt.

Sources / References

Related Tools:

Debt to Equity Ratio Calculator – Calculate Good Debt to Equity Ratio