Debt Equity Ratio Formula:
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| Debt Equity Ratio Formula |
Meaning:
Debt Equity Ratio measures the firm's ability to meet its long-term obligations on time, by comparing with the firm's own money or net worth. As a measure of additional safety, value of intangible assets like goodwill and brands are deducted from the net worth.
Example:
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| Example Calculation of Debt Equity Ratio of NMDC Ltd. |
Required Number:
The Debt Equity Ratio must be one or below. Lower the number than one so much stronger the company is and vise-versa.
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ReplyDeleteI find it helpful to understand how a firm's debt compares with its net worth.
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