What is a good D/E ratio?

Generally below 1.0 is healthy. Capital-intensive industries (utilities, real estate) may have higher ratios. Tech companies often have very low D/E.

Is zero debt always better?

Not necessarily. Some debt can be beneficial due to tax advantages of interest payments and leveraging returns for shareholders.

Debt-to-Equity Ratio Formula

The debt-to-equity ratio measures a company's financial leverage by comparing what it owes to what it owns. Higher ratios mean more debt-financed operations.

Debt-to-Equity Ratio

D/E Ratio = Total Debt / Total Shareholders' Equity

Where:

Total Debt = All short-term and long-term borrowings
Equity = Total shareholders' equity (assets minus liabilities)

Step-by-Step:

1
Find total debt
Add all short-term and long-term borrowings from the balance sheet.
2
Find total equity
Total assets minus total liabilities, or read from balance sheet.
3
Divide
Debt / Equity.

Worked Examples:

Company analysis

Debt: ₹30CrEquity: ₹50Cr

Result: 0.6

D/E = 30/50 = 0.6 (below 1 is generally healthy)