How do I calculate the debt-equity ratio?
To calculate the debt-equity ratio, you divide total liabilities by total equity. Do you have specific numbers in mind?
Yes, my total liabilities are $200,000 and total equity is $100,000.
Great! Using the formula: Debt-Equity Ratio = Total Liabilities / Total Equity, it would be $200,000 / $100,000 = 2.0.
What does a debt-equity ratio of 2.0 indicate?
A debt-equity ratio of 2.0 means that for every dollar of equity, there are two dollars of debt, indicating higher financial leverage.
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