a moderately geared balance sheet
- Total debt
- ₹40,00,000
- Total equity
- ₹60,00,000
- Operating profit, for the coverage check
- ₹15,00,000
- Annual interest
- ₹4,00,000
Debt to equity0.67
Worked by hand on all three
Open this exampleBusinessfinance
Debt-to-Equity Ratio Calculator
Leverage as a ratio, with interest coverage alongside. The ratio says how much debt there is and coverage says whether it can be serviced, and only the second is about survival.
Also called: leverage ratio, gearing calculator.
Debt to equity
0.67
0.67. Debt is 40% of total capital, and operating profit covers interest 3.75 times over. Modestly geared.
Debt as a share of capital
40%
Interest coverage
3.75
Total capital
₹1,00,00,000
Equity multiplier
1.67
How it reads
Modestly geared.
An estimate, not an offer or a guarantee. Projected returns assume the rate you entered holds for the whole term, which no market does.
Method and background
How this is calculated
Debt over equity describes the capital structure. On its own it is a weak signal, because what a business can carry depends entirely on how stable its cash flows are: a utility carries debt a software company could not. Interest coverage is the more useful companion, because it asks whether operating profit actually covers the interest, and below about 1.5 that question becomes urgent regardless of the ratio.
debt to equity = total debt / total equity- total debt
- Short and long-term interest-bearing borrowings (currency)
- total equity
- Shareholders funds (currency)
Worked examples
Each of these is asserted on every build. If a change to the engine ever moved one of these answers, the build would fail before the page could print it.
no debt is a zero ratio
- Total debt
- ₹0
- Total equity
- ₹60,00,000
- Operating profit, for the coverage check
- ₹15,00,000
- Annual interest
- ₹0
Debt to equity0
boundary
Open this exampleMethod and limits
What it assumes
- Total debt includes short and long-term interest-bearing borrowings.
What it deliberately does not model
- Operating leases, pension deficits and other off-balance-sheet obligations behave like debt and may not be in the figure.
- Negative equity makes the ratio meaningless rather than large.
Formula version 1.0.0 · definition 1.0.0 · India · Report a problem with this calculator
Frequently asked questions
- What is a safe debt-to-equity ratio?
- It depends entirely on the industry and the stability of cash flow. A ratio of 2 is unremarkable for a utility and alarming for a startup. Interest coverage travels better across industries.