debt-equity ratio


debt-equity ratio
A ratio used to examine the financial structure or gearing of a business. The long-term debt, normally including preference shares, of a business is expressed as a percentage of its equity. A business may have entered into an agreement with a bank that it will maintain a certain debt-equity ratio; if it breaches this agreement the loan may have to be repaid. The debt-equity ratio is now sometimes expressed as the ratio of the debt to the sum of the debt and the equity. See gearing ratios

Big dictionary of business and management. 2014.

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