Financial StatementsIntermediate

Debt-to-Equity Ratio

D/E

Total borrowings divided by shareholders' equity.

Detailed explanation

It measures financial leverage: how much of the business is funded by lenders versus owners.

Formula

D/E = Total debt ÷ Shareholders' equity

Example

Debt ₹200 cr ÷ equity ₹400 cr = 0.5.

Why it matters

High leverage magnifies both returns and risk.

Key points

  • Banks and NBFCs naturally run high D/E.
  • Use net debt for a cleaner view.
  • Check alongside interest coverage.

Related terms

Net DebtInterest Coverage RatioLeverage

More in Financial Statements

Income StatementRevenueCost of Goods SoldGross MarginEBITDAEBIT

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.