Answer first
What this calculator tells you
Calculate debt-to-equity, the debt ratio and the equity multiplier from assets and liabilities. Judge how much of a company is funded by borrowing before you lend to it or invest in it. Formula: Debt ratio = total liabilities ÷ total assets; debt-to-equity = total liabilities ÷ shareholders' equity; equity multiplier = total assets ÷ equity. At the worked-example inputs, the debt-to-equity ratio is 1.50×. Holding every other input steady, moving total assets from $720,000 to $1,080,000 moves the result from 1.00× to 3.00×.
Transparent method
The formula
Judge how much of a company is funded by borrowing before you lend to it or invest in it.
Worked example
Example inputs
How to interpret the result
Two firms can hold the same assets and carry very different risk, because one paid for them with owners' money and the other with borrowed money. With $900,000 of assets and $540,000 of liabilities, the owners hold $360,000 of equity. That gives a debt-to-equity ratio of 1.5, a debt ratio of 60 percent and an equity multiplier of 2.5. All three describe the same split in different words.
At the worked-example inputs the debt-to-equity ratio is 1.50×. It rises with total liabilities and falls as total assets increases.
These are planning metrics, not audited accounting or a valuation opinion.
Before you rely on it
What to check
Compare against peers in the same industry. Utilities and banks run far more debt than software firms, so a good ratio depends on the trade.
The common error
Where people go wrong with debt-to-equity and debt ratio calculator
Treating a high ratio as always bad. Debt at a low interest rate can raise the return on equity, and the danger only appears when earnings are too weak to cover the interest.
Sensitivity evidence
How total assets changes the debt-to-equity ratio
Holding every other input at the worked-example value, moving total assets from $720,000 to $1,080,000 moves the debt-to-equity ratio from 1.00× to 3.00×: a spread of 2.00×, or 133% of the worked-example result.
| Total assets | Debt-to-equity ratio | Debt ratio | Equity multiplier |
|---|---|---|---|
| $720,000 | 3.00× | 75.0% | 4.00× |
| $810,000 | 2.00× | 66.7% | 3.00× |
| $900,000worked example | 1.50× | 60.0% | 2.50× |
| $990,000 | 1.20× | 54.5% | 2.20× |
| $1,080,000 | 1.00× | 50.0% | 2.00× |
Every input, tested
Which input moves the debt-to-equity ratio most
Of the 2 inputs, total assets moves the debt-to-equity ratio most (0.80× across the range tested) and total liabilities moves it least (0.77×).
| Input | Tested from | To | Debt-to-equity ratio at each end | Swing |
|---|---|---|---|---|
| Total assets | $810,000 | $990,000 | 2.00× to 1.20× | 0.80× (53%) |
| Total liabilities | $486,000 | $594,000 | 1.17× to 1.94× | 0.77× (51%) |
Two variables at once
Debt-to-equity ratio by total assets and total liabilities
Across the grid the debt-to-equity ratio runs from 0.67× to 9.00×. Moving total assets from $720,000 to $1,080,000 shifts it by 2.00× at the middle column, and moving total liabilities from $432,000 to $648,000 shifts it by 1.65× at the middle row, so total assets is the bigger lever here.
| Total assets \ Total liabilities | $432,000 | $540,000 | $648,000 |
|---|---|---|---|
| $720,000 | 1.50× | 3.00× | 9.00× |
| $810,000 | 1.14× | 2.00× | 4.00× |
| $900,000 | 0.92× | 1.50× | 2.57× |
| $990,000 | 0.77× | 1.20× | 1.89× |
| $1,080,000 | 0.67× | 1.00× | 1.50× |
The highlighted cell is the worked example: 1.50×.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Total assets | $900,000 | Enter the total assets used in this calculation. |
| Total liabilities | $540,000 | Enter the total liabilities used in this calculation. |
| Debt-to-equity ratio | 1.50× | |
| Debt ratio | 60.0% | |
| Equity multiplier | 2.50× | |
Inputs, definitions and assumptions
Total assets
Enter the total assets used in this calculation. The prefilled worked-example value is $900,000.
Total liabilities
Enter the total liabilities used in this calculation. The prefilled worked-example value is $540,000.
How to use this calculator
- 1Verify the inputs. Gather total assets and total liabilities from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the debt-to-equity ratio at 1.50×. Store your own version of it as Scenario A.
- 3Test one change. Start with total assets, the input with the biggest effect here: moving total assets from $810,000 to $990,000 takes the debt-to-equity ratio from 2.00× to 1.20×, a swing of 53% of the worked-example figure.
- 4Check the boundary. Read the interpretation boundary above before acting on the result.
People also ask
Frequently asked questions
How do you calculate debt-to-equity and debt ratio?
Debt ratio = total liabilities ÷ total assets; debt-to-equity = total liabilities ÷ shareholders' equity; equity multiplier = total assets ÷ equity. Enter total assets in dollars and total liabilities in dollars. At the worked-example inputs the debt-to-equity ratio is 1.50×.
What does the debt-to-equity and debt ratio result mean?
Judge how much of a company is funded by borrowing before you lend to it or invest in it. At the worked-example inputs the debt-to-equity ratio is 1.50×. It rises with total liabilities and falls as total assets increases.
How much does total assets change the debt-to-equity ratio?
Holding every other input at the worked-example value, moving total assets from $720,000 to $1,080,000 moves the debt-to-equity ratio from 1.00× to 3.00×, a spread of 2.00×.
What are the limits of this debt-to-equity and debt ratio calculator?
These are planning metrics, not audited accounting or a valuation opinion. The tables on this page test total assets only from $720,000 to $1,080,000; a value outside that range is not tabulated here.
Which input moves the debt-to-equity ratio most in the debt-to-equity and debt ratio calculator?
Ranked by how far each moves the debt-to-equity ratio across the range tested: total assets (0.80×, 53%) and total liabilities (0.77×, 51%).
How much does total liabilities matter in the debt-to-equity and debt ratio calculator?
The worked example uses $540,000. With the other inputs left at the worked example, moving total liabilities from $486,000 to $594,000 takes the debt-to-equity ratio from 1.17× to 1.94×, a swing of 51% of the worked-example figure.
Which inputs change the debt ratio in the debt-to-equity and debt ratio calculator?
At the worked-example inputs it is 60.0%. Total assets takes it from 66.7% to 54.5% and total liabilities takes it from 54.0% to 66.0%.
Which inputs change the equity multiplier in the debt-to-equity and debt ratio calculator?
At the worked-example inputs it is 2.50×. Total assets takes it from 3.00× to 2.20× and total liabilities takes it from 2.17× to 2.94×.
What does EBITDA leave out?
Interest, taxes, depreciation and amortization by definition, and it also ignores capital spending and changes in working capital. That is why EBITDA is not the same as cash flow.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.