The debttoequity ratio is a measure of a company's financial leverage that relates the amount of a firms' debt financing to the amount of equity financing. It is calculated by dividing a firm's total liabilities by total shareholders' equity. What is considered a "high" debttoequity ratio differs depending upon the industry, because some industries tend to utilize more debt financing than others. There is no single value above which would be deemed a high debttoequity ratio.
The financial industry, for example, typically has a higher debttoequity ratio. This is due to the fact that banks and other financial institutions borrow money to lend money, which results in a higher debttoequity ratio. Other industries that are highly capital intensive, such as services, utilities and the industrial goods sector, also tend to have higher debttoequity ratios.
As a result, investors must look at a company's historical debttoequity ratio figures to determine if there have been significant changes that could indicate a red flag. In addition, investors must also make comparisons between other similar companies and the industry as a whole to determine if a particular firm has what could be considered a high debttoequity ratio.
A higher debttoequity ratio typically shows that a company has been aggressive in financing its growth with debt, and there may be a greater potential for financial distress if earnings do not exceed the cost of borrowed funds.

Is there value in comparing companies from different sectors by using the debttoequity ...
Find out why using the debttoequity ratio for reviewing companies doesn't always make for an applestoapples comparison. Read Answer >> 
What is the formula for calculating the debttoequity ratio?
Find out how to use this fundamental financial ratio to help assess a company's performance. Read Answer >> 
What debt/equity ratio is typical for companies in the insurance sector?
Learn about the average debttoequity ratio among insurance providers. Find out about the ranges of D/E among insurers and ... Read Answer >> 
Which leverage ratios are most useful for analyzing manufacturing companies?
See which leverage ratios investors and creditors are likely to use when analyzing the debt burdens for manufacturing companies. Read Answer >> 
What debt to equity ratio is common for a oil and gas company?
Read about the rising trend of debt financing in the oil and gas industry since the financial crisis as expressed through ... Read Answer >> 
How do I calculate the debttoequity ratio in Excel?
Understand the basics of the debt to equity ratio, how it is interpreted as a measure of financial stability and how it is ... Read Answer >>

Investing
Understanding Leverage Ratios
Large amounts of debt can cause businesses to become less competitive and, in some cases, lead to default. To lower their risk, investors use a variety of leverage ratios  including the debt, ... 
Investing
What is the Gearing Ratio?
Gearing ratios are financial ratios that measure a company’s leverage. 
Investing
Stocks with Big Dividend Yields: 'It's a Trap!'
Should you seek high yieldingdividend stocks in the current investment environment? 
Investing
Useful Balance Sheet Metrics
These metrics can help you better understand the information found on balance sheets. 
Investing
Analyzing AT&T's Debt Ratios in 2016 (T)
Learn about AT&T Inc. and its key debt ratios, such as the debttoequity ratio, interest coverage ratio and cash flowtodebt ratio. 
Investing
Analyzing General Electric's Debt Ratios in 2016 (GE)
Evaluate GE's debt picture using the most important metrics for a largecap conglomerate, including the debttoequity (D/E) ratio and the interest coverage ratio. 
Investing
4 Simple Investing Ratios You Need To Know
Dissecting a company’s financial statements to uncover ways to make money is a challenging endeavor. Here are four ratios that can help. 
Small Business
Do Superstar CEOs Guarantee Better Returns?
Do great CEOs mean better returns for investors? Here are 14 stocks that show it might just start at the top. 
Investing
6 Basic Financial Ratios And What They Reveal
Here's a brief introduction to six financial ratios every investor should be familiar with. 
Investing
6 Growth Stocks You Should Keep an Eye On (ALK, AOS)
These growth stocks have appreciated in an uncertain environment, and they all have the potential to be big longterm winners.

Optimal Capital Structure
The best debttoequity ratio for a firm that maximizes its value. ... 
Current Ratio
The current ratio is a liquidity ratio measuring a company's ... 
Capitalization Ratios
Indicators that measure the proportion of debt in a company’s ... 
Ratio Analysis
A ratio analysis is a quantitative analysis of information contained ... 
LongTerm Debt To Capitalization Ratio
A ratio showing the financial leverage of a firm, calculated ... 
Key Ratio
A mathematical ratio that illustrates and summarizes the current ...