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Saturday, April 9, 2011

Debt to Equity Ratio Formula & Example

Definition: Debt to Equity Ratio (D/E) is a financial ratio used to measure the relationship between the capital contributed by creditors and the capital contributed by shareholders. The ratio is also known as Risk, Gearing or Leverage.

Formula:
D/E = Total Debt (liabilities)/ Total Equity
* Sometimes only long-term debt is used instead of total liabilities in the calculation.

Example 1:

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