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A key financial metric used by lenders and investors to evaluate how a company is financing its operations versus using its own funds.
Due within one year (Bank OD, Payables)
Due after one year (Term Loans, Bonds)
Total Assets minus Total Liabilities (or Share Capital + Retained Earnings)
Debt-to-Equity Ratio
Status: Healthy / Normal
Total Debt
₹25,00,000
Total Equity
₹15,00,000
Conservative. The company owes less than what it owns. Good during economic downturns, but might mean the company isn't using cheap debt to grow aggressively.
Standard / Good. The company uses a healthy mix of debt and equity to finance growth. Most investors like this range.
High Risk. The company is highly leveraged. A ratio of 3 means for every ₹1 of equity, there is ₹3 of debt. (Note: Banks and financial institutions naturally have very high ratios, which is normal for their sector).