Debt-to-Equity Ratio

Definition:

A comparison between the company’s total assets and its short- and long-term debts. This ratio is often used to measures a company’s ability to borrow and repay money, or its future prospects.

Examples:

Acme has a very low debt-to-equity ratio, so it is an attractive company for investors who are looking at long-term investment portfolios.

Many startup companies have a high debt-to-equity¬ ratio, but are expected to reverse their initial numbers within the first five years.