Glossary
Debt-to-Equity (D/E) Ratio
Total liabilities divided by shareholder equity.
D/E = Total Debt / Shareholder Equity. A ratio of 1.0 means the firm is funded equally by lenders and shareholders. Higher ratios amplify the volatility of equity returns and the risk of insolvency in a downturn.
Industry context is everything. Utilities and REITs run high D/E by design because regulated cash flows support steady debt service; software firms typically run near zero. Always compare within sector, not across.
A near-zero D/E maintained over years is a positive signal — the firm generates enough internal cash to fund growth without tapping external capital markets.