Result
Debt/Equity
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This calculation is for informational purposes only and does not replace advice from a qualified professional. Formulas and rates may not fit your exact situation — double-check the figures before making decisions.
How it is calculated
Debt/Equity = total debt ÷ shareholders' equity. A value of 0.6 means there's 60 cents of debt for every dollar of equity in the business.
The ratio ties directly into WACC and ROE: more debt usually lowers the weighted average cost of capital (debt is cheaper than equity and comes with a tax shield), but it also raises risk — if profit falls, fixed debt payments don't go away, while owners' dividends and profit can drop to zero first.
There's no universal "healthy" Debt/Equity: capital-intensive industries with stable cash flow (real estate, utilities) run comfortably at high ratios, while businesses with volatile revenue usually keep debt lower to avoid solvency risk in a bad year. It's best read alongside DSCR — whether operating income can actually service that debt.