| Debt/Equity
Ratio |
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Total
Liabilities
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Shareholders
Equity
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A measure
of a company's financial leverage, calculated by dividing long term
debt by shareholders equity.
Indicates what proportion of equity and debt that the company is using
to finance its assets.
Note: Sometimes investors only use interest bearing long term debt
instead of total liabilities.
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A higher debt/equity ratio generally means that a company has been aggressive in financing its growth with debt, which can result in volatile earnings as a result of the additional interest expense.
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Dictionary
