**Debt to equity ratio formula**diagram. This is one of the top business frameworks helping clients improve on their approach to strategy, project management, IT, HR, internal processes and client experience.

Debt to Equity Ratio = (short term debt + long term debt + fixed payment obligations) / Shareholders’ Equity Debt to Equity Ratio in Practice If, as per the balance sheet, the total debt of a business is worth $50 million and the total equity is worth $120 million, then debt-to-equity is 0.42.

The Debt to Equity ratio (also called the “debt-equity ratio”, “risk ratio”, or “gearing”), is a leverage ratio that calculates the weight of total debt and financial liabilities against total shareholders’ equity. Unlike the debt-assets ratio which uses total assets as a denominator, the D/E Ratio uses total equity.

Total Liabilities is calculated using the formula given below Total Liabilities = Accounts Payable + Current Portion of Long Term Debt + Short Term Debt + Long Term Debt + Other Current Liabilities Total Liabilities = $17,000 + $3,000 + $20,000 + $50,000 + $10,000 Total Equity is calculated using the formula given below