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Frequently Asked Questions

How do you calculate debt to equity ratio?

Calculating the Ratio. You can calculate the debt-to-equity ratio using the following equation: Debt / Equity = Total Debt / Shareholders' Equity. On the balance sheet use the total debt, which includes short-term debt (current liabilities) and long-term balances.

What would be considered a high debt to equity ratio?

A high debt to equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. During the past 13 years, the highest Debt-to-Equity Ratio of Verizon Communications was 12.14. The lowest was 0.62. And the median was 1.44.

Is it better to have a higher or lower debt to equity ratio?

A lower debt to equity ratio usually implies a more financially stable business. Companies with a higher debt to equity ratio are considered more risky to creditors and investors than companies with a lower ratio. Unlike equity financing, debt must be repaid to the lender.

How do you calculate equity ratio?

The equity ratio is calculated by dividing total equity by total assets. Both of these numbers truly include all of the accounts in that category. In other words, all of the assets and equity reported on the balance sheet are included in the equity ratio calculation.

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