Debt to Equity
Select Equity |
D/E | = | Total Debt Total Equity |
Debt to Equity In A Nutshell
This is a measure of risk many people use in their research to gauge how leveraged the company is and if there is risk by having too much debt on their books. For a quick understanding, the higher the number the more debt the company has on the books and this could be the cause of growth or stress. The lower the number, the less debt the company has and is not as leveraged, meaning they do not owe substantial sums of money.
Debt to equity is a measure used to compare the financials of a company to others within the same industry along with measuring its leverage. This is calculated by taking the companies debt and dividing it by the equity in the company, giving you a number expressed in a percentage.
Closer Look at Debt to Equity
Taking is a step further, some of the reasons you may not want to invest in a company that has a high debt to equity number is if the markets begin to slow and sales are affected, they may not be able to pay back their loans, leading to a possible bankruptcy. Secondly, if the number is high, they may be depending on lending to keep cash flow healthy, which is not a sustainable growth model.
On the other side, if the number is low, this means they are not leveraged and are either doing well enough to not need debt or lenders may not lend to them. You will have to research this because the answer would dictate where you go from there. A little debt is alright, but you do not want the company to be over leveraged.
Another way to use this ratio is to compare it to others within the same industry, that way you can see the average of the whole industry. If it is too leveraged, you may look elsewhere within the industry to give you less risk and more value for your dollar.
This is typically one of the most widely used ratios and should be at the front of your fundamental research tool kit. Be sure to look under the hood and find what is driving the result of your equation because there may be more than just the number. Remember that this takes in data and no human emotion, so if you get a feel the company is going one direction, take that into account to help give you a well rounded opinion before jumping into an investment.
All Fundamental Indicators
Be your own money manager
Our tools can tell you how much better you can do entering a position in Investor Education without increasing your portfolio risk or giving up the expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate risk-adjusted returns of your individual positions relative to your overall portfolio.Did you try this?
Run Price Exposure Probability Now
Price Exposure ProbabilityAnalyze equity upside and downside potential for a given time horizon across multiple markets |
| All Next | Launch Module |
Becoming a Better Investor with Macroaxis
Macroaxis puts the power of mathematics on your side. We analyze your portfolios and positions such as Investor Education using complex mathematical models and algorithms, but make them easy to understand. There is no real person involved in your portfolio analysis. We perform a number of calculations to compute absolute and relative portfolio volatility, correlation between your assets, value at risk, expected return as well as over 100 different fundamental and technical indicators.Build Optimal Portfolios
Align your risk with return expectations
Other Consideration for investing
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios | |
| Efficient Frontier Plot and analyze your portfolio and positions against risk-return landscape of the market. |