Understanding Rajan Company's Debt-To-Equity Ratio
Understanding Debt-To-Equity Ratio:
Debt-to-equity (D/E) ratio compares a companyâs total debt to its total equity and can be used to evaluate how much leverage a company is using.
The Debt-to-equity ratio is calculated using the formula:
Debt-to-equity ratio = Total debt (or liabilities)/Total equity.
Rajan company's most recent balance sheet reported total liabilities of $0.8 million and total equity of $1.1 million.
Debt-to-equity ratio = $800,000 / $1,100,000 = 0.73.
Therefore, Rajan Company's debt-to-equity ratio is 0.73, indicating that the company has $0.73 in debt for every dollar of equity.