Debt to Equity Ratio

Debt to Equity Ratio:

            Debt to Equity ratio indicates the relationship between the external equities or Outsiders funds and the internal equities or shareholders funds. It is determined to ascertain soundness of the long term financial policies of the company. But if this ratio decreases over the year it sounds good.

            The debt to equity ratio is used to measuring solvency and researching the capital structure of a company. It indicates how much the company is leveraged (in debt) by comparing what is owed to what is owned. In other words it measures a company’s ability to borrow and repay money. A high debt to equity ratio could indicate that the company may be over-leveraged, it should reduce its debt. A Debt to Equity Ratio of 1.1 is considered satisfactory.

Debt to Equity Ratio=	Total Debts
	Share Holder's Equity