What is the debt-to-equity ratio formula?
An example of an AI chatbot conversation about the debt-to-equity ratio formula.
What is the debt-to-equity ratio formula?
The debt-to-equity ratio formula is calculated by dividing a company's total liabilities by its shareholders' equity.
Why is the debt-to-equity ratio important?
It's important because it helps assess a company's financial leverage and risk. A higher ratio indicates more debt relative to equity.
Can you give me an example of how to calculate it?
Sure! If a company has total liabilities of $200,000 and shareholders' equity of $100,000, the debt-to-equity ratio would be 200,000 / 100,000 = 2.0.
What does a debt-to-equity ratio of 2.0 mean?
A ratio of 2.0 means that for every dollar of equity, the company has two dollars of debt, indicating higher financial risk.
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