Debt to Equity Ratio
Debt to Equity Ratio is another name for Debt Equity Ratio, showing the proportion of debt used relative to shareholders' funds.
Debt to Equity Ratio and Debt Equity Ratio refer to the same metric and are used interchangeably in financial statements and IPO prospectuses.
It is calculated as:
Debt to Equity Ratio = Total Debt / Total Equity
Investors use this ratio to:
Assess how leveraged a company is before its IPO
Compare financial risk across companies in the same sector
Understand how much cushion equity provides against debt obligations
Example:
A company with ₹30 crore debt and ₹60 crore equity has a debt to equity ratio of 0.5, indicating moderate leverage.