## debt to equity ratio

An example of a company's debt to equity ratio is 2 when a company has $1,000,000 in liabilities and equity of $500,000.

## debt-to-equity ratio - Investment & Finance Definition

A company’s total liabilities divided by stockholders’ equity. The ratio shows how indebted a company is. A higher proportion of debt compared to equity as a contributor to a firm’s capital makes earnings more volatile and increases the likelihood that the company will not be able to meet its interest payments and may default. A company with a high debt-to-equity ratio can become a potential credit risk if the economy slows down or if competition increases.