Debt to equity ratio definition and explanation:

Debt to Equity Ratio is also referred to as Debt Ratio, Financial Leverage Ratio or Leverage Ratio.

The debt to equity (debt or financial leverage) ratio indicates the extent to which the business relies on debt financing.

Upper acceptable limit of the debt to equity (debt or financial leverage) ratio is usually 2:1, with no more than one-third of debt in long term.

A high financial leverage or debt to equity ratio indicates possible difficulty in paying interest and principal while obtaining more funding.

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