What it measures
Debt-to-equity (D/E) divides a company's total debt by its shareholders' equity (assets minus liabilities, from the The balance sheet). It shows how much of the business is funded by lenders compared with owners.
A D/E of 0.5 means $0.50 of debt for every $1 of equity.
How to read it
| D/E | Reading |
|---|---|
| Below 0.5 | Conservative |
| 0.5 to 1 | Moderate |
| Above 1 | Debt-heavy; check cash flow |
| Above 2 | High; normal only in some industries |
A common screening filter is D/E below 1, used in the Finviz screener setup.
Industry matters
Banks, utilities and real estate companies carry high debt by design, backed by steady cash flows or loan books. Compare within an industry.
Where it misleads
- Buybacks reduce equity. A company that has bought back years of shares can show a huge or even negative D/E while being very healthy.
- Book equity is an accounting number, not market value.
- It ignores cash. A company with $10 billion of debt and $15 billion of cash has a high D/E and no net debt.
That is why cash versus debt and net debt to Free cash flow are often more useful checks.
See also
- Balance sheet strength: cash versus debt Why cash above debt is the simplest safety test for a company, how to judge debt with free cash flow, and what cash buys in hard times.
- The balance sheet How to read a balance sheet: assets, liabilities and shareholders' equity, the checks that matter, and how to judge a company's financial health.
- Return on invested capital (ROIC) ROIC shows how much profit a company earns on the money invested in it. Why it is the best single test of a moat, and how it compares with ROE.
- Finviz screener guide A step-by-step guide to screening for growing, fairly valued companies with the free Finviz stock screener, with suggested filters and columns.
Last updated September 30, 2026. Education only, not investment advice.