Debt to Equity Ratio

The debt-to-equity ratio shows the proportion of equity and debt a company is using to finance its assets and the extent to which shareholder’s equity can fulfill obligations to creditors in the event of a business decline.

A low debt-to-equity ratio indicates a lower amount of financing by debt via lenders versus funding through equity via shareholders.

A higher ratio indicates the company is getting more of their financing from borrowing which may pose a risk to the company if debt levels are too high.

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