Debt/equity
Borrowings for every dollar the owners have in the business. Higher means more leverage, and bigger swings both ways.
Worked example · a round-number company
Debt$2.0B÷Equity$4.0B=Debt/equity0.5xHow to read it
↓Lower is better. Less debt means smaller swings when business turns down.
Example Co. 0.5x
Under 0.5x0.5x to 1.5xOver 1.5x
Utilities and banks run high by design; compare within an industry.
Keep in mind
- Buybacks shrink equity and push the ratio up without new borrowing.