Debt equity ratio

The debt-equity ratio measures a company's financial leverage by comparing its total debt to its shareholder equity. It indicates how much of the company’s funding comes from borrowed money versus owners' investments. A higher ratio suggests greater reliance on debt, which can amplify profits but also increases financial risk. Conversely, a lower ratio indicates a more conservative approach with less debt. This ratio helps investors and lenders assess the company's financial stability and risk profile, informing decisions about lending, investing, or managing the business.