Debt/Net Worth

Black and White Strong and Bold Community Protest Crisis Hub Facebook Post (29)

Debt/Net Worth

Dictionary Definition

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.


Equation

 

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.

0 comments

There are no comments yet. Be the first one to leave a comment!