Debt-To-Equity Ratio
The debt-to-equity ratio compares how much a company finances with borrowed money versus owners’ equity. It is total liabilities divided by total equity.
A lower ratio generally means a safer balance sheet, but the typical level varies by industry. Capital-intensive businesses, such as utilities, often carry more debt. Analysts compare a company with its industry and watch for a sudden jump, which may mean the business has taken on more risk.
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