Debt-to-Equity Ratio
factor.formula
Debt-Equity Ratio:
in:
- :
Total liabilities in the most recent reporting period. Refers to all debts incurred by the company at the end of a specified reporting period, including current liabilities and non-current liabilities. Specifically, it includes short-term loans, accounts payable, employee salaries payable, taxes payable, long-term loans, bonds payable, etc.
- :
Total shareholders' equity in the most recent reporting period. Refers to the equity of the company's owners in the company at the end of the specified reporting period, which is the net amount after deducting liabilities from assets. Specifically includes paid-in capital (or share capital), capital reserves, surplus reserves, retained earnings, etc.
factor.explanation
The debt-to-equity ratio measures the relative proportion of debt financing to equity financing in a company's capital structure. The higher the ratio, the greater the company's reliance on debt financing and the greater the financial risk. A high debt-to-equity ratio may mean that the company faces greater pressure to repay its debts, and it may also amplify earnings fluctuations. Conversely, a lower debt-to-equity ratio generally indicates a more robust financial structure, but it may also suggest that the company is not fully utilizing financial leverage to increase shareholder returns. It should be noted that industry characteristics will affect the reasonable debt-to-equity ratio range. For example, capital-intensive industries generally have higher debt-to-equity ratios. When evaluating a company's financial health, a comprehensive analysis should be conducted in combination with the industry average and the company's own business model.