Debt-equity Ratio
What is it? The ratio of a companys liabilities to its equity (total value of stock). Long-term debt-equity is the ratio of a companys long-term liabilities (debt that wont be paid off in one year) to its equity. Total debt-equity is the ratio of a companys long-term and current liabilities (debt that will be paid off within one year) to its equity.The higher the level of debt, the more important it is for a company to have positive earnings and steady cash flow. Debt in and of itself is not bad, but since it requires the timely payout of interest to debt holders, it is important to analyze a company within the context of the likeliness that it will have adequate resources to meet its payments in the coming business and economic environment. By the nature of certain industries, you will find that some contain only companies with a high ratio (or vice versa). So, for comparative purposes, debt-equity ratio is most useful for companies within the same industry. See also debt-assets ratio.Added By: Tyler
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