What is a Debt/Equity Ratio?
Debt/equity ratio is a measure of the proportion of equity versus debt that is used to finance various portions of a company’s operations. It is used as a standard for judging a company’s financial standing. A debt/equity ratio is calculated by taking the total liabilities and dividing it by shareholders’ equity. There are a number of variations that can be taken into account when determining a debt/equity ratio. For example, most of the time, liabilities only include long-term debt, such as debt financed through bonds or other forms of business loans. Preferred stock is another example. When determining the debt/equity ratio, it may be counted as an asset or liability. While companies may have other types of liabilities, such as those listed in an accounts payable ledger, these may or may not be counted as liabilities for the purposes of calculating a debt/equity ratio. In many cases, because they change so often, it may not provide a truly accurate account of liabilities for a compan
