Table of Contents
The debt-to-equity (D/E) ratio is an effective solvency measure that helps show how a company uses debt and equity to fund its activities.
Our free D/E Ratio Excel template makes it simple for investors, analysts, and business owners to calculate and understand this measure. This tool is useful for studying businesses in any industry.
Complete the form below to download the template and try a modeling exercise to improve your understanding of the D/E ratio.
More Financial Templates
Key Features of the Excel Template
The Excel template helps users analyze the debt-to-equity (D/E) ratio with clear and practical tools. It is designed to be easy to use for all, from beginners to experienced analysts.
Below are the main features included:
- Basic and Detailed Calculators: The template offers a simple calculator for quick D/E ratio results and a detailed excel model for deeper study. Users can input basic numbers or explore complex cases from a detailed balance sheet, making it helpful for different needs.
- Interpretation Guide to Explain Results: The template includes notes on what high, low, or negative D/E ratios mean. This helps users understand the numbers and use them for financial choices.
- Easy-to-Use Excel Fields: The template has clear spaces to enter total debt and total equity. It includes directions to guide users in adding data correctly, with no advanced skills needed.
- Automatic Ratio Results: After adding data, the template calculates the D/E ratio right away. This gives accurate numbers without requiring users to do extra work.
- Chart for Clear Display: A chart shows the D/E ratio next to debt and equity figures. This makes it easy to see how a company balances its financing.
- Works for Any Industry: The template fits businesses like manufacturing or technology, as it handles different debt levels found across industries.
These tools make it easier to study a company’s financial leverage accurately.
What is Debt to Equity Ratio
The debt-to-equity (D/E) ratio is a financial solvency measure that compares a company’s total debt to its shareholders’ equity. It shows whether a company depends more on borrowed funds or its own capital to run its operations.
This helps in understanding a company’s financing choices.
A high D/E ratio means the company uses more debt, which can increase its financial risk. A low ratio shows more use of shareholders’ equity, suggesting less need for borrowed funds.
Investors, analysts, and lenders use this measure to study a company’s financial health.
Debt to Equity Ratio Formula
The debt-to-equity (D/E) ratio is found with a simple formula that compares debt to equity. It gives a number that helps show a company’s financial structure.
The formula is:
D/E Ratio = Total Debt ÷ Total Equity
- Total Debt: This includes all amounts a company owes, such as short-term loans and long-term borrowings.
- Total Equity: This is the value of shareholders’ funds, calculated by subtracting total liabilities from total assets.
This formula helps users see how debt and equity work together in a company’s finances.
How to Calculate Debt to Equity Ratio
To calculate the debt-to-equity (D/E) ratio, follow a few clear steps using a company’s balance sheet. This process helps find the ratio accurately.
Here is how to do it:
- Find Total Debt: Check the balance sheet for all liabilities. Add short-term debts, like loans due in a year, and long-term debts, such as bonds. For example, if a company has $200,000 in short-term loans and $450,000 in long-term loans, total debt is $650,000.
- Find Total Equity: Look at the equity part of the balance sheet. Add items like common stock, retained earnings, and additional paid-in capital.
For example, if a company has $500,000 in common stock, $600,000 in retained earnings, and $100,000 in additional paid-in capital, total equity is $1,200,000.
- Divide Debt by Equity: Use the formula by dividing total debt by total equity. For the example, $650,000 ÷ $1,200,000 equals 0.54. This means 54 cents of debt for every dollar of equity.
- Review the Number: A ratio of 0.54 shows more use of equity than debt, suggesting lower financial risk. Checking this against other companies in the same industry helps understand the result better.
The Excel template simplifies these steps with spaces to enter data and automatic results, making calculations fast and correct.
