Debt-to-Equity Ratio
factor.formula
Leverage ratio calculation formula:
The total debt calculation formula is:
The specific meanings of the parameters in the formula are as follows:
- :
It refers to the total amount of all debts of a company at the end of the most recent reporting period, including short-term debts that need to be repaid within one year (such as short-term loans) and long-term debts with a repayment period of more than one year (such as long-term loans). This value is directly taken from the corresponding items in the liabilities section of the financial statements.
- :
Refers to the total amount of shareholders' equity of a company at the end of the most recent reporting period, also known as net assets, which represents the residual interest of the company's owners in the company's assets. This value is taken directly from the corresponding account in the shareholders' equity section of the financial statements.
- :
Refers to the loans that a company needs to repay within one year or one operating cycle at the end of the most recent reporting period, including but not limited to short-term bank loans, notes payable, etc. The specific values are listed in the short-term loans account in the financial statements.
- :
Refers to the loans that a company needs to repay in one year or one operating cycle at the end of the most recent reporting period, including but not limited to long-term bank loans, bonds payable, etc. The specific values are listed in the long-term loans account in the financial statements.
factor.explanation
The leverage ratio (Debt-to-Equity Ratio) is an important indicator for measuring corporate financial risk. It reflects the extent to which a company uses debt for financing in its operating activities. The higher the ratio, the more the company relies on debt financing, and the higher the financial risk, because excessive debt levels may increase the company's interest expense pressure and may lead to debt repayment difficulties during economic downturns. Conversely, a lower leverage ratio indicates that the company relies more on its own funds for operations and has relatively low financial risks, but it may also mean that the company is more conservative in using financial leverage, limiting the possibility of achieving faster growth through debt financing. In practical applications, the reasonable level of this indicator should be comprehensively analyzed in combination with industry characteristics, company operating conditions and macroeconomic environment, and conclusions should not usually be drawn based on a single indicator.