This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It shows how much protection the owners are providing creditors. The higher the ratio, the greater the risk being assumed by creditors.
Why it Matters to You
A high D/E ratio is often associated with high risk; it means that a company has been aggressive in financing its growth with debt.
If a company has a negative D/E ratio, this means that the company has negative shareholder equity, the company has more liabilities than assets.
Leave a commentPlease log in or register to post a comment