Debt/Equity Ratio Template

This debt-equity ratio template shows you how to calculate D/E ratio given the amounts of short-term and long-term debt and shareholder’s equity.

The Debt-to-Equity ratio (also called the “debt-equity ratio”, “risk ratio” or “gearing”), is a leverage ratio that calculates the weight of total debt and financial liabilities against the total shareholder’s equity. Unlike the debt-assets ratio, which uses total assets as a denominator, the debt-to-equity ratio uses total equity. This ratio highlights how a company’s capital structure is tilted either toward debt or equity financing.

Debt-to-Equity ratio formula

Short formula:

Debt-to-Equity Ratio = Total Debt / Shareholders’ Equity

Long formula:

Debt-to-Equity Ratio = (short-term debt + long-term debt + fixed payment obligations) / Shareholders’ Equity

A high debt-equity ratio can be good when a firm can easily service its debt obligations (through cash flow) and is using the leverage to increase equity returns.

Credits to :  Corporate Finance Institute