Debt to Equity Ratio Calculator

A debt-to-equity ratio calculator divides total debt by total shareholders' equity, a quick read on how much of a business is financed by borrowing versus by its owners' own capital.

How to calculate the debt-to-equity ratio

Divide total debt by total shareholders' equity. Total debt usually includes both short-term and long-term interest-bearing liabilities, such as loans, bonds and lines of credit, though some analysts include all liabilities. Total equity comes from the balance sheet as total assets minus total liabilities. A business with 400,000 dollars in debt and 600,000 dollars in equity has a debt-to-equity ratio of 0.67, meaning it holds about 67 cents of debt for every dollar of equity.

What counts as a healthy debt-to-equity ratio

A ratio below 1 is generally seen as conservative, since equity funds more of the business than borrowed money does. A ratio between 1 and 2 is common and often manageable for established companies with steady cash flow. Above 2, a business is leaning heavily on debt, which can amplify returns in good years but also amplify losses and default risk when revenue falls. There is no single correct number, since capital-intensive industries like utilities or manufacturing routinely run higher ratios than asset-light software or service businesses.

Debt-to-equity versus liquidity ratios

Debt-to-equity measures long-term financial structure, while ratios like the current ratio measure short-term liquidity, whether a business can cover what it owes in the next year. The two tell different stories, and a business can look strong on one while looking weaker on the other, so lenders and investors typically read them together rather than relying on either alone.