A company's total debt to its total shareholder equity
Debt-to-Equity ratio is a financial metric that compares a company's total debt to its total equity, providing insights into the proportion of borrowed funds compared to the owner's investment and retained earnings. It is calculated by dividing total debt by total equity. The ratio helps small business owners assess the level of financial leverage and risk within their company. A higher ratio indicates a larger debt burden, while a lower ratio suggests a healthier balance between debt and equity. Small business owners often use the debt-to-equity ratio when evaluating funding options and analyzing their company's financial health.