The debt-to-equity ratio is a measure of how a company finances its operations. It’s calculated by dividing the total liabilities of the company by its total equity. This ratio is significant because it tells us whether a company relies more on debt or equity to finance its activities. A ratio below 1 means the company uses more equity than debt, which is generally safer. However, it’s essential to compare the ratio to industry norms and the company’s competitors to get a full picture.
