How is the debt-to-equity ratio calculated?

The debt-to-equity ratio is calculated by dividing total liabilities by total equity. This financial metric provides insight into the relative proportion of a company's debt compared to its shareholders' equity. It is a key indicator of a company's financial leverage and risk. A higher debt-to-equity ratio suggests that a company is financing a larger portion of its operations through debt, which can increase financial risk, while a lower ratio indicates greater reliance on equity financing.

Understanding the calculation is crucial for evaluating a company's financial structure and assessing its ability to meet financial obligations. It serves as a tool for investors and creditors to gauge the level of risk associated with investing in or lending to the company.