Debt to Equity Calculator

What Is a Debt to Equity Calculator?

A Debt to Equity Calculator helps investors calculate the relationship between a company's debt and its shareholders' equity. The Debt to Equity Ratio, commonly called D/E ratio, is a financial leverage ratio used in fundamental analysis.

The ratio can help investors understand how much debt a company uses compared with the capital contributed by shareholders.

How to Calculate Debt to Equity Ratio?

The basic Debt to Equity formula is:

For example, if a company has total debt of ₹1,500 crore and shareholders' equity of ₹3,000 crore:

The company's Debt to Equity Ratio would therefore be 0.50 : 1.

How to Calculate Long Term Debt to Equity Ratio?

The long-term debt to equity ratio focuses specifically on a company's long-term debt instead of its total debt.

For example, if long-term debt is ₹1,000 crore and shareholders' equity is ₹3,000 crore:

The long-term debt to equity ratio would be approximately 0.33 : 1.

What Does the Debt to Equity Ratio Tell Investors?

The Debt to Equity Ratio provides context about a company's use of debt relative to shareholders' equity. A higher ratio generally means that debt represents a larger amount relative to equity.

• Helps evaluate financial leverage
• Shows the relationship between debt and equity
• Useful for comparing companies in the same industry
• Can be tracked over several financial years
• Useful as part of fundamental stock analysis

Is a Lower Debt to Equity Ratio Always Better?

A lower Debt to Equity Ratio indicates less debt relative to shareholders' equity, but the ratio should not be evaluated in isolation.

Different industries have different capital structures. Companies in capital-intensive industries may naturally use more debt than businesses that require less capital. Investors should therefore compare the ratio with similar companies and the company's own historical figures.

Debt to Equity Ratio Example

Suppose a company has:

• Total Debt = ₹2,000 crore
• Long-Term Debt = ₹1,500 crore
• Shareholders' Equity = ₹4,000 crore

The total Debt to Equity Ratio would be:

The long-term Debt to Equity Ratio would be:

Debt to Equity vs Long-Term Debt to Equity

Why Use a Debt to Equity Calculator?

Manually calculating financial ratios can be time-consuming when analyzing several companies. This calculator provides a quick way to calculate both the total Debt to Equity Ratio and, when long-term debt is entered, the long-term Debt to Equity Ratio.

For a broader analysis, investors can also review profitability, cash flow, interest coverage, return on equity, asset turnover and valuation ratios.