Debt-to Equity Ratio

The Debt to Equity ration indicates the percentage of total funds provided by creditors and those provided by owners. The type of industry the firm is operating in effects this measure, like most debt measures. If the industry is capital intensive (largest component of its operating expense is equipment), then its leverage ratios will be greater than labor intensive firms will. Comparison to industry averages is a key in interpreting these ratios.

Debt-to-Equity = Total Debt/Stockholders' Equity