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Debtr equity ratio

Hi, brothers & sisters,

Could the debt equity ratio be negative? What does it mean if it is negative?

1 Answer

  • 1 decade ago
    Favorite Answer

    就我所知Debtr equity ratio 不會是負數的

    Definition of Debtr equity ratio

    A measure of a company's financial leverage. Debt/equity ratio is equal to long-term debt divided by common shareholders' equity. Typically the data from the prior fiscal year is used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier, especially in times of rising interest rates, due to the additional interest that has to be paid out for the debt.

    For example, if a company has long-term debt of $3,000 and shareholder's equity of $12,000, then the debt/equity ratio would be 3000 divided by 12000 = 0.25. It is important to realize that if the ratio is greater than 1, the majority of assets are financed through debt. If it is smaller than 1, assets are primarily financed through equity.

    因為debt 同equity 都一定是正數﹐所以 debt equity ratio 一定是正數

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