How much a company relies on borrowed money versus its own shareholders' money to run its business.
The debt-to-equity ratio compares how much of a company's funding comes from borrowed money against how much comes from shareholders' own investment in the business. A high ratio means the company is leaning heavily on debt, which can amplify returns when things go well but leaves it more exposed if revenue drops and it still has to make interest payments regardless. Investors use it to gauge financial risk, and a sudden rise in a company's ratio, taking on a lot of new debt, is often something analysts flag as worth watching.
Part of the Open Bell Glossary — plain-English explanations of the terms that come up on the show. Browse every term.