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Debt-to-equity ratio

What is a debt-to-equity ratio?

The debt-to-equity ratio is a financial metric used to assess a company's financial leverage, calculated by dividing its total liabilities by its shareholders' equity. It indicates the proportion of a company's funding that comes from debt versus equity.

A high debt-to-equity ratio suggests that a company has financed a large portion of its growth with debt. While debt can be a useful tool for businesses to finance their operations and growth, a high debt-to-equity ratio can be risky as it indicates a higher level of financial risk. Conversely, a low debt-to-equity ratio suggests that a company has relied more on equity for financing, which doesn't require fixed payments but does dilute ownership.

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