What is ideal debt to equity ratio?
- Debt-to-Equity ratio compares the Total Liabilities to the
Total Equity of the company. It paints a useful picture of the
company's liability position and is frequently used.
Debt-to-Equity Ratio = Total Liabilities / Shareholder's
- Both the Total Liabilities and Shareholder's Equity are found
on the Balance Sheet.
- When this number is less than 1, it indicates that the
company's creditors have less money in the company than its equity
holders. That, typically, would be an ideal threshold
to be below.
- It's common for large, well-established companies to have
Debt-to-Equity ratios exceeding 1. For instance, GE carries a
Debt-to-Equity ratio of around 4.4 (440%), and IBM around