Debt to Equity Ratio Calculator
The debt-to-equity ratio and the related leverage measures — how much of a balance sheet is borrowed money.
Debt-to-equity is total liabilities divided by shareholders' equity.
How the debt to equity ratio calculator works
Debt-to-equity is total liabilities divided by shareholders' equity. A ratio of 1 means the business is funded half by debt and half by owners; 2 means twice as much debt as equity.
What counts as high depends entirely on the industry. Utilities and banks operate at ratios that would be alarming in software, because their cash flows are predictable and their assets are pledgeable.
Formula: D/E = total liabilities / shareholders equity
Worked examples
| Inputs | Debt-to-equity ratio | Note |
|---|---|---|
| 400k debt against 500k equity | 0.8 | ratio 0.8 — conventional |
| Heavily geared | 3 | ratio 3.0 |
| Debt-free | 0 | ratio 0 |
FAQFrequently asked questions
What is a good debt-to-equity ratio?
Under 1 is conservative for most businesses, 1 to 1.5 typical. Utilities, banks and property routinely run far higher because their cash flows are predictable.
Should I include all liabilities?
The strict measure uses only interest-bearing debt; the broad one uses all liabilities. Both are used, so say which you mean.
What is interest cover?
Operating profit divided by interest expense. Below about 2 the business has little room for a bad year; below 1 it cannot service its debt from operations.
Why can equity be negative?
When accumulated losses exceed capital contributed. The ratio then becomes meaningless, which is why this calculator refuses it.
Is more leverage bad?
Not inherently — debt is cheaper than equity and magnifies returns. It also magnifies losses, which is exactly why the ratio is watched.
Where these figures come from
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- Consumer Financial Protection Bureau — the US consumer finance regulator
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.