This ratio measures how much debt your business is carrying as compared to the amount invested by its owners. It indicates the amount of liabilities the business has for every dollar of shareholders' equity. Equity is defined as the assets available for collateral after the priority lenders have been repaid.
Bankers watch this indicator closely as a measure of your capacity to repay your debts. The higher the ratio, the higher the risk your company carries. In general, a company's ratio is benchmarked to a specific industry standard.
How to calculate the debt-to-equity ratio:
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