Debt-to-Equity Ratio

Debt-to-equity ratio is debt divided by shareholders’ equity, using the stated balance-sheet definitions.

A simple example

A company with $300 million of debt and $200 million of stated equity has a debt-to-equity ratio of 1.5. The ratio is a starting point; the timing and cost of the debt still matter.

Why this matters to income investors

More borrowing can amplify both portfolio income and losses borne by shareholders.

How to use debt-to-equity ratio in your research

Check the exact numerator, denominator, and reporting period in the company’s filing. Follow the trend and look for debt or interest costs growing faster than the earnings available to pay them.

This material is general education and information, not individualized investment, tax, or legal advice.