The debt-to-equity ratio (D/E) relates a company's liabilities to its equity. Critivest takes all liabilities into account, not only debt. A value of 0.5 means there are 50 cents of liabilities for every euro of equity.
DebttoequityRatio > 0 and DebttoequityRatio < 0.5
How is the debt-to-equity ratio calculated?
Debt-to-equity ratio = total liabilities / equity
Liabilities here include everything the company owes: besides debt, also trade payables, provisions and other obligations. Many sources calculate the ratio with debt only, so their values are usually lower.
What does a debt-to-equity ratio of 1.5 mean?
For the fictional Example Company:
| Total liabilities | EUR 6 billion |
|---|---|
| Equity | EUR 4 billion |
| Debt-to-equity ratio | 6 / 4 = 1.5 |
| Long-term debt | EUR 1.8 billion |
| Long-term debt to equity | 1.8 / 4 = 0.45 |
When is the debt-to-equity ratio of little use?
- With negative equity, the debt-to-equity ratio is negative and not meaningful. The preset criterion therefore also checks that it is greater than 0.
- Share buybacks reduce equity and raise the debt-to-equity ratio, even without new debt.
- Typical values differ widely between industries, for example between utilities and software companies.
- Banks and insurers have large liabilities from deposits and insurance obligations; their debt-to-equity ratio cannot be compared with that of other companies.
Using the debt-to-equity ratio as your own criterion
The preset criterion “Debt-to-equity ratio less than 0.5” checks this condition:
DebttoequityRatio > 0 and DebttoequityRatio < 0.5You set the limit yourself; 0.5 is an example, not a recommendation.
Which balance sheet items does Critivest use?
All values come from the latest balance sheet. If an item is missing there, Critivest takes it from the balance sheets of the three quarters before. Like market capitalization and net income, equity refers only to the shareholders of the parent company, without minority interests.
Related variants: LongtermDebtToEquity relates only long-term debt to equity,
CurrentdebttoequityRatio only current liabilities.
Periods and missing values: Methodology.
Formula reference in Critivest
Name in conditions: DebttoequityRatio
DebttoequityRatio = TotalLiabilities / TotalEquityTotal liabilities divided by total equity
Name in conditions: LongtermDebtToEquity
LongtermDebtToEquity = LongTermDebt / TotalEquityNoncurrent long-term debt divided by total equity; excludes the current portion of long-term debt
Names used in conditions
TotalLiabilities- Balance sheet: Total liabilities
TotalEquity- Balance sheet: Equity attributable to shareholders of the parent company
LongTermDebt- Balance sheet: Long-term debt including lease liabilities
Related formulas
- Enterprise value: Enterprise value adds debt, minority interests and preferred stock to the market capitalization and subtracts cash and equivalents.
- Liquidity ratios: Calculate and interpret the current, quick and cash ratios with formulas, a worked example and a comparison with operating cash flow.
- Altman Z-score: The Altman Z-score combines ratios from the balance sheet and income statement into one value for the risk of financial distress. Plus the Z″-score.
Sources
- Debt-to-equity ratio, Wikipedia
Last updated: November 4, 2026