How To Interpret Debt-To-Equity Ratio To Assess The
Financial Health Of Your Business
To run a successful business, you need to have
a clear picture of how well your company is
performing. So how do you achieve this clear
picture?
Whilst there are many metrics you can use to
determine your financial health, Online
Accounting Tips recommends debt-to-equity
ratio as one of the most useful of them all!
This ratio is determined by
dividing your company’s total
debt by total shareholder
equity.
As explained in the guide, a higher D/E
ratio indicates that your company has taken
on too much risk and may not be in a good
financial position to cover its debts.
On the other hand, a low D/E ratio suggests
that your company has not had to rely on
borrowing to finance its operations and is,
therefore, in a stronger financial position.
The guide moves on to explain the
terms ‘liquidity’ and solvency’ in
assessing your company's
financial health and also delves
into the factors affecting debt-to-
equity ratio.
Visit
https://onlineaccountingtips.com/debt-to-
equity-ratio-assessing-a-companys-
financial-leverage/ to read the guide.
Check it out today!