TL;DR
The debt-to-equity ratio shows the proportion of a company's total debt to its equity, with a high ratio (e.g., 2.0) indicating high risk, while a low ratio (e.g., 0.5) signifies financial stability. This ratio directly impacts investment decisions.
8 min readHow does a company's debt level affect investment decisions? Ideal ratios by sector and BIST data.
Debt-to-Equity Ratio
This metric is a key component of fundamental analysis. It should be evaluated alongside the P/E ratio and P/B ratio.
How to Calculate
See our financial statement analysis guide for calculation details. Stock valuation methods use this metric alongside other measures.
Application on BIST
Filter by this metric in Borsafolio's stock screener. Each stock detail page provides quarterly financials and comparative metrics.
Screen BIST stocks by financial metrics.
Open Stock Screener →Related articles: Fundamental Analysis Guide, P/E Ratio, P/B Ratio, Financial Statements.
Frequently Asked Questions
What is the debt-to-equity ratio?
The debt-to-equity ratio is a financial indicator that shows the proportion of a company's total debt to its equity. This ratio is used to analyze the company's level of indebtedness and financial health.
How is the debt-to-equity ratio calculated?
The debt-to-equity ratio is calculated by dividing total debt by total equity. For example, a company with 1,000,000 TL of debt and 500,000 TL of equity would have a ratio of 2.0.
What does a high debt-to-equity ratio mean?
A high debt-to-equity ratio indicates that the company is financed by more debt and therefore carries higher risk. For instance, a ratio of 2.0 means there are 2 TL of debt for every 1 TL of equity.
What does a low debt-to-equity ratio indicate?
A low debt-to-equity ratio signifies the company's financial stability and solid financial structure. This situation is considered less risky for investors.
What is financial leverage?
Financial leverage refers to a company's capacity to invest using debt. Companies with high debt-to-equity ratios can invest more, potentially yielding higher profits.
This content does not constitute investment advice. Past performance is not a guarantee of future results. Make your investment decisions based on your own risk profile.
