Debt-equity ratio

Debt-to-equity ratio or D/E is the proportion of shareholders’ equity to debt. Equity is the amount left in assets after the liabilities have been covered. Shareholders’ equity, more specifically, is the remaining interest in a company’s assets which is distributed to shareholders, whether for preferred or common shares.

Debt-to-equity ratio is closely tied to the concept of leveraging. Leveraging is a term used for the practice of taking out loans for the purpose of funding investments and other asset purchases. As such, debt-to-equity ratio may sometimes be referred to as leverage.

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