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Finance
Debt to Equity Ratio
How much debt a company has compared to the money owners have put in — a measure of financial risk.
Lower ratios usually mean more stability. Some industries (like utilities) naturally carry more debt because of big infrastructure costs. Always compare within the same sector.
A rising debt-to-equity ratio is often a warning sign that a company is borrowing more than it should.
It’s like checking how much your friend borrowed versus how much they actually own in their house.
Real world: A company with a debt-to-equity ratio of 2.0 has twice as much debt as equity. That’s riskier than one with a ratio of 0.5. Banks and investors watch this number closely — too much debt can sink a company in a downturn.
💡 Debt to equity ratio tells you how much a company is betting with other people’s money instead of its own.