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Debt-to-Equity Ratio
A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.
Implications
A financial ratio that compares a company�s total liabilities to its shareholder equity, used to assess financial leverage and risk, with higher ratios indicating greater reliance on debt to finance operations.
Example
Example: An automotive company with a debt-to-equity ratio of 2:1 indicates that it has twice as much debt as equity, suggesting a higher financial risk and potentially higher returns for shareholders.
Related Terms
Different from other leverage ratios, which might focus on specific aspects of debt, the debt-to-equity ratio provides a broad measure of financial leverage relative to equity.
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