How do I calculate the debt-to-equity ratio?
An example of an AI chatbot conversation about calculating debt-to-equity ratio.
How do I calculate the debt-to-equity ratio?
To calculate the debt-to-equity ratio, you divide a company's total liabilities by its shareholder equity.
What do you mean by total liabilities and shareholder equity?
Total liabilities include all debts and obligations, while shareholder equity is the net assets owned by shareholders.
Can you give me an example of how to calculate it?
Sure! If a company has $500,000 in liabilities and $250,000 in equity, the ratio is 500,000 / 250,000 = 2.0.
What does a debt-to-equity ratio of 2.0 indicate?
A ratio of 2.0 means the company has twice as much debt as equity, which may indicate higher financial risk.
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