The Debt To Equity Ratio
the debt to equity ratio is a measure of a company's financial leverage. al and ed both go to the bank for business loans. the loan officer looks at their respective balance sheets. ed has $120,000 in assets, cash, equipment and so on. ed also has $100,000 in liabilities, mostly loans, so ed's equity is $20,000. the loan officer divides ed's liabilities by his equity to come up with the ratio of 5. this means ed has $5 of debt for every $1 of equity. ed is highly leveraged, so he is a high risk for the bank. his application is declined. al's balance sheet is much stronger. al has $150,000 in assets, and only $50,000 in liabilities. his equity is $100,000. al's debt to equity ratio is 0.5, $50,000 over $100,000. this means al has ¢50 of debt for every $1 of equity. al's low debt to equity ratio makes him a low risk for the bank. his application is approved. the debt to equity ratio identifies companies that are highly leveraged, and therefore higher risked, but no single ratio control the whole story. debt equity is one of the many metrics that investors use to valuate stocks.
- debt to equity ratio・・・負債比率→https://ja.wikipedia.org/wiki/%E8%B2%A0%E5%82%B5%E6%AF%94%E7%8E%87
- loan officer・・・融資担当者
- come up with・・・～を求める
- the whole story・・・全体像