Debt to Equity Ratio

How is D/E calculated

Debt - Equity Ratio = Total Liabilities / Shareholders' Equity

A high debt/equity ratio generally means

a company has been aggressive in financing its growth with debt

Equity is refered to

difference between the total value of a corporation or individual's assets and that corporation or individual's liabilities

Aggressive leveraging practices are often associated

high levels of risk

D/E ratios should only be used to compare companies

in the same industry

If a lot of debt is used to finance increased operations (high debt to equity)

the company could potentially generate more earnings than it would have without this outside financing