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There are different variations of the debt to equity ratios, but the objective of these financial ratios is to determine how a company has been financing its growth.
A high ratio means that the company has been growing due to debt. Not all debt is bad, but if the number is exceedingly high, remember that the company has to pay off the loan as well as interest payments.
An important factor to consider then is to determine whether the returns generated from the debt exceeds the cost of debt (i.e. interest).
Debt/Equity Ratios
Total Debt/Equity Ratio = Total Liabilities / Shareholders Equity
Long Term Debt/Equity Ratio = Long Term Debt / Shareholders Equity
Short Term Debt/Equity Ratio = Short Term Debt / Shareholders Equity
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