Debt-to-Equity Ratio
Total borrowings divided by shareholders' equity, measuring how much of the business is funded by lenders relative to owners.
Formula
Debt-to-Equity = Total Debt / Shareholders' Equity
Unit
ratio (x, times)
In depth
Debt-to-equity is the standard leverage measure, but its denominator is a book number, so a company with large accumulated losses can show terrifying leverage while trading comfortably, and a company that has bought back stock above book shows worse leverage without borrowing more. Acceptable levels vary enormously by industry: a utility with contracted cash flows can carry what would destroy a commodity producer. Since Ind AS 116, lease liabilities belong in total debt for any meaningful comparison. Interest coverage is usually the better single measure, because it tests the ability to service debt from earnings rather than the size of the debt against a historical cost base.
Worked example
Debt of ₹500 crore against equity of ₹450 crore gives a ratio of 1.11. A ₹100 crore buyback would cut equity to ₹350 crore and push the ratio to 1.43 — worse leverage from returning cash, not from borrowing.
Illustrative figures, chosen so the arithmetic is easy to follow. Not a live price and not a valuation of any company.
Educational reference only
This entry explains what “Debt-to-Equity Ratio” means. It is not investment advice and not a recommendation to buy or sell any security. Any numbers above are illustrative, not live prices, and nothing here predicts price direction or rates a stock. Consider your own circumstances and consult a SEBI-registered investment adviser before acting.