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 to 1) Balanced for many businesses; sector-dependent. High (above ~1 to 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.

More in The Ratios

• Asset Turnover: Sales generated per rupee of assets.
• P/E Ratio: Price paid per rupee of earnings.
• Earnings Per Share (EPS): Profit sliced per share.
• Book Value and P/B: Net worth per share.
• Price-to-sales (P/S): Price per rupee of revenue.
• PEG Ratio: P/E adjusted for growth.
• Return on Equity (ROE): Profit from owners' money.
• Return on Assets (ROA): Profit from everything it owns.
• Return on Capital Employed: Profit from all long-term capital.
• Profit Margins: How much of each sale becomes profit.
• Dividend Yield: Cash returned per rupee invested.
• Dividend Payout Ratio: How much profit is paid out.

All chapters in Learn NEPSE Investing