Total Debt / Equity

The Total Debt to Equity ratio indicates what proportion of equity and debt the company is using to finance its assets. Given that the Debt/Equity ratio measures a company’s debt relative to the total value of its stock, it is most often used to gauge the extent to which a company is taking on debts as a means of leveraging (attempting to increase its value by using borrowed money to fund various projects). A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. Aggressive leveraging practices are often associated with high levels of risk. This may result in volatile earnings as a result of the additional interest expense.

Calculated as: Total Debts (Short term + long term) / Shareholders Equity