What does debt-to equity ratio measure?

The debt-to-equity ratio measures a company's financial leverage by comparing its total liabilities to its shareholders' equity. It indicates the proportion of debt used to finance the company's assets relative to equity funding. A higher ratio suggests greater financial risk, as it implies the company relies more on borrowed funds, while a lower ratio indicates a more conservative approach to financing. This metric is crucial for investors and lenders to assess the financial stability and risk profile of a business.