The National Directory of Certified Public Accountants

Ask A CPA - Financial Statements

What Is The Debt To Equity Ratio ?

This ratio illustrates the relationship between capital contributed by the creditors (such as banks and suppliers) which loan a business cash and the owners equity remaining in the business. It is commonly used to measure the degree of financial leverage of the business. The Total Long-Term Debt, divided by Stockholders' Equity = DTE Ratio. (Stockholders Equity = Total Assets, minus Total Liabilities).

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