Is 1.9 a good debt-to-equity ratio? (2024)

Is 1.9 a good debt-to-equity ratio?

A good debt-to-equity ratio is generally below 2.0 for most companies and industries. To lower your company's debt-to-equity ratio, you can pay down loans, increase profitability, improve inventory management and restructure debt.

Is a 2 debt-to-equity ratio good?

What is a good debt-to-equity ratio? Although it varies from industry to industry, a debt-to-equity ratio of around 2 or 2.5 is generally considered good. This ratio tells us that for every dollar invested in the company, about 66 cents come from debt, while the other 33 cents come from the company's equity.

What is an acceptable level for debt-to-equity ratio?

The optimal D/E ratio varies by industry, but it should not be above a level of 2.0. A D/E ratio of 2 indicates the company derives two-thirds of its capital financing from debt and one-third from shareholder equity.

Why is a 1.2 debt-to-equity ratio good?

With a debt to equity ratio of 1.2, investing is less risky for the lenders because the business is not highly leveraged — meaning it isn't primarily financed with debt.

Is 0.2 debt to equity good?

Generally, a good debt-to-equity ratio is anything lower than 1.0. A ratio of 2.0 or higher is usually considered risky. If a debt-to-equity ratio is negative, it means that the company has more liabilities than assets—this company would be considered extremely risky.

Is 1.5 a good debt-to-equity ratio?

Generally, a good debt ratio is around 1 to 1.5.

What if debt-to-equity ratio is less than 2?

The maximum acceptable debt-to-equity ratio for more companies is between 1.5-2 or less. Large companies having a value higher than 2 of the debt-to-equity ratio is acceptable. 3. A debt-to-equity ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations.

Is 2.5 a good debt to equity ratio?

Many investors prefer a company's debt-to-equity ratio to stay below 2—that is, they believe it is important for a company's debts to be only double their equity at most. Some investors are more comfortable investing when a company's debt-to-equity ratio doesn't exceed 1 to 1.5.

Is a 0.48 debt to equity ratio good?

Whether or not a debt ratio is "good" depends on the context: the company's industrial sector, the prevailing interest rate, etc. In general, many investors look for a company to have a debt ratio between 0.3 and 0.6.

What is a reasonable debt ratio?

Do I need to worry about my debt ratio? If your debt ratio does not exceed 30%, the banks will find it excellent. Your ratio shows that if you manage your daily expenses well, you should be able to pay off your debts without worry or penalty. A debt ratio between 30% and 36% is also considered good.

Is a debt to equity ratio of 1.4 good?

Generally, a good debt to equity ratio is around 1 to 1.5. However, the ideal debt to equity ratio will vary depending on the industry, as some industries use more debt financing than others.

What is a 1.0 debt to equity ratio?

A debt to equity ratio can be below 1, equal to 1, or greater than 1. A ratio of 1 means that both creditors and shareholders contribute equally to the assets of the business. A ratio greater than 1 implies that the majority of the assets are funded through debt.

What is the rule of thumb for debt to equity ratio?

In most industries, a good debt to equity ratio would be under 1 or 1.5. However, this number varies depending on the industry as some industries use more debt financing than others. For example, it is not uncommon for capital intensive industries like manufacturing to have higher ratios, which are above 2.

Is 0.5 a good debt-to-equity ratio?

Generally, a lower ratio is better, as it implies that the company is in less debt and is less risky for lenders and investors. A debt-to-equity ratio of 0.5 or below is considered good.

Is 0.00 a good debt-to-equity ratio?

Generally speaking, a debt-to-equity ratio of between 1 and 1.5 is considered 'good'. A higher ratio suggests that debt is being used to finance business growth. This is considered a riskier prospect. But really low ratios that are nearer to 0 aren't necessarily better.

What if debt-to-equity ratio is less than 1?

The debt to equity ratio shows a company's debt as a percentage of its shareholder's equity. If the debt to equity ratio is less than 1.0, then the firm is generally less risky than firms whose debt to equity ratio is greater than 1.0.

What does a debt-to-equity ratio of 1.75 mean?

D e b t t o E q u i t y r a t i o = T o t a l l i a b i l i t i e s T o t a l E q u i t y. A value of $1.75, therefore, indicates that for every dollar of equity, a firm uses $1.75 in debt to finance its assets. This ratio indicates that the business has more credit financing than the owner's financing.

What is a 2.5 debt-to-equity ratio?

The ratio is the number of times debt is to equity. Therefore, if a financial corporation's ratio is 2.5 it means that the debt outstanding is 2.5 times larger than their equity. Higher debt can result in volatile earnings due to additional interest expense as well as increased vulnerability to business downturns.

Is a 1.25 debt-to-equity ratio good?

Whether 1.25 is good largely depends on the industry in which the company operates. If you're in a capital intensive industry, then 1.25 may be considered a low debt to equity ratio. But if other companies don't have much debt, 1.25 might be high.

What does a 1.5 debt-to-equity ratio mean?

A debt-to-equity ratio of 1.5 would indicate that the company in question has $1.50 of debt for every $1 of equity. To illustrate, suppose the company had assets of $2 million and liabilities of $1.2 million. Since equity is equal to assets minus liabilities, the company's equity would be $800,000.

What is a good equity ratio?

Still, as a general rule of thumb, most companies aim for an equity ratio of around 50%. Companies with ratios ranging around 50% to 80% tend to be considered “conservative”, while those with ratios between 20% and 40% are considered “leveraged”.

What if debt-to-equity ratio is less than 0?

Low DE Ratio

This means that the company's shareholder's equity is in excess and it does not need to tap its debts to finance its operations and business.

What does 1.7 debt-to-equity ratio mean?

The debt to equity ratio compares how much debt you have to how much equity you have. This should give you a number less than one. If it is more than one, you have more debt than assets or you have made an error.

What is a 2.4 debt-to-equity ratio?

Poor debt-to-equity ratio

Using the debt-to-equity ratio, their calculation looks like this:Debt-to-equity ratio = $300,000 / $125,000Debt-to-equity ratio = 2.4The company's debt-to-equity ratio is 2.4, which means its debt is considerably higher than its assets, making it less likely for lenders to approve a loan.

What does 0.5 debt-to-equity ratio mean?

The lower value of the debt-to-equity ratio is considered favourable, as it indicates a reduced risk. So, if the ratio of debt to equity is 0.5, that means that the company has half its liabilities because it has equity.