Debt-to-Equity Ratio
Total debt divided by stockholders' equity.
Definition
The debt-to-equity ratio measures a company's financial leverage by comparing its total debt to its equity base. A higher ratio indicates more debt-financed operations, which amplifies both returns and risks. This metric is less commonly used for banks due to their inherently leveraged business model.
Formula
D/E = Total Debt / Stockholders' Equity
Why It Matters
For non-bank financials and fintechs, the D/E ratio reveals capital structure risk. Companies with high D/E ratios may struggle to refinance debt during credit tightens or to maintain dividends during earnings downturns.