Debt-to-equity

How much the company borrows.

Debt-to-equity compares borrowed money to owners' money, the clearest single gauge of financial risk. Heavy borrowing means bigger obligations before shareholders see anything. Debt-to-equity = Total debt ÷ Shareholders' equity Debt Rs 60 crore, equity Rs 120 crore. D/E = 0.5, 50 paisa of debt per rupee of owners' money. Low (below ~0.5) Conservatively financed, safer. Moderate (~0.5–1) Balanced for many businesses; sector-dependent. High (above ~1–2) Heavily borrowed, riskier if earnings dip. Sector matters Banks and utilities normally carry more debt. Fast financial-risk read Flags fragile balance sheets Pairs with ROE 'Good' level varies by sector Some debt is healthy Ignores interest coverage

Part of Learn NEPSE Investing, a free course on reading Nepali company accounts and charts. Section: The Ratios.