Learn / Fundamentals / Financial health / Debt-to-Equity
Debt-to-Equity = Total Debt ÷ Shareholders' Equity
Debt-to-equity compares what a company owes to what owners put in. Borrowing makes good years look better — and bad years much worse.
01 Feel it first
Pick No debt or Heavy debt, then tap Good year or Bad year. Watch how the same business swing feels bigger once money is borrowed.
02 Break the intuition
Good-year hero. Bad year wipes equity. Reveal both sides.
03 Feel the leverage
Pick a debt level, then tap Good year or Bad year. Watch how the same business swing hits equity harder as leverage rises.
Pick a debt level, then tap Good year or Bad year.
04 Watch the path
Same two-year swing, different debt loads. Press Play and watch equity rise, then fall harder at high leverage.
Illustrative equity index: good years then a bad stretch.
Pick a path, then press Play to watch the years fill in.
05 Two flavors
Same debt, different bottom number. Book equity is the accounting pile. Market equity is what the stock is worth today.
06 The catch
Utilities often run high; software often runs low; banks are a special case with their own leverage rules.
07 Check yourself
08 Where it breaks
Rent-like lease debts can sit on or off the balance sheet depending on accounting rules. Compare companies carefully.
Big losses or buybacks can push equity below zero. Then debt-to-equity becomes meaningless or inverted.
A “high” number for software is normal for a utility. Always compare within the same sector.
Debt-to-equity does not say if the bills are due next month or in ten years. A wall of near-term maturities is a different risk.
Open any ticker for debt context and coverage — then screen for balance-sheet risk.
In a good year with nodebt, owners' return is about +20%. Borrowing makes good years look better and bad years much worse.