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debt-to-equity ratio investment & finance definition
A company’s total liabilities divided by stockholders’
equity. The ratio shows how indebted a company is. A higher proportion of debt
compared to equity as a contributor to a firm’s capital makes earnings more
volatile and increases the likelihood that the company will not be able to meet
its interest payments and may default. A company with a high debt-to-equity
ratio can become a potential credit risk if the economy slows down or if
competition increases.
See debt-to-equity ratio in Wall Street Words
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