What is a 1.5 debt-to-equity ratio? (2024)

What is a 1.5 debt-to-equity ratio?

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.

Is 1.5 a good debt-to-equity ratio?

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

What does a debt to asset ratio of 1.5 mean?

Its debt to assets ratio is: $1,500,000 Liabilities ÷ $1,000,000 Assets. = 1.5:1 Debt to assets ratio. The 1.5 multiple in the ratio indicates a very high amount of leverage, so ABC has placed itself in a risky position where it must repay the debt by utilizing a small asset base.

Is 2 a good debt-to-equity ratio?

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 does a debt-to-equity ratio of 1.6 mean?

A higher debt-to-equity ratio indicates that a company has higher debt, while a lower debt-to-equity ratio signals fewer debts. Generally, a good debt-to-equity ratio is less than 1.0, while a risky debt-to-equity ratio is greater than 2.0.

What is a comfortable debt-to-equity ratio?

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.

Is 1.6 a good debt-to-equity ratio?

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.

What is a bad debt ratio?

The bad debt to sales ratio represents the fraction of uncollectible accounts receivables in a year compared to total sales. For example, if a company's revenue is $100,000 and it's unable to collect $3,000, the bad debt to sales ratio is (3,000/100,000=0.03).

What is a good debt ratio?

By calculating the ratio between your income and your debts, you get your “debt ratio.” This is something the banks are very interested in. A debt ratio below 30% is excellent. Above 40% is critical. Lenders could deny you a loan.

Is 0 a good debt-to-equity ratio?

While this may sound like an attractive financial position, it's not necessarily always good. On the positive side, a zero debt-to-equity ratio can mean that a company has a strong financial position, is not burdened with debt payments, and has greater flexibility in its financial management.

What is the debt to equity ratio of Apple?

31, 2023.

What is Google's debt to equity ratio?

Alphabet(Google)'s debt to equity for the quarter that ended in Dec. 2023 was 0.10. A high debt to equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense.

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 1.4 a good debt-to-equity ratio?

The D/E ratio can vary as per the industry and various other factors that influence the company's performance. However, it is generally agreed that a debt-to-equity ratio between 1.5 to 2.5 indicates a financially stable company with a low risk profile.

Is 1.25 a good debt-to-equity ratio?

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.

How do I calculate debt-to-equity ratio?

The debt-to-equity (D/E) ratio is used to evaluate a company's financial leverage and is calculated by dividing a company's total liabilities by its shareholder equity.

Is 1.7 a good debt-to-equity ratio?

The optimal debt-to-equity ratio will tend to vary widely by industry, but the general consensus is that it should not be above a level of 2.0. While some very large companies in fixed asset-heavy industries (such as mining or manufacturing) may have ratios higher than 2, these are the exception rather than the rule.

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.

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 is too high for debt to ratio?

Key takeaways

Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.

What does a 1.0 debt-to-equity ratio mean?

If a company's D/E ratio is 1.0 (or 100%), that means its liabilities are equal to its shareholders' equity. Anything higher than 1 indicates that a company relies more heavily on loans than equity to finance its operations.

Is a debt ratio below 1 good?

If the ratio is below 1, the company has more assets than debt. Broadly speaking, ratios of 60% (0.6) or more are considered high, while ratios of 40% (0.4) or less are considered low. However, what constitutes a “good debt ratio” can vary depending on industry norms, business objectives, and economic conditions.

Is a debt ratio of 1 good?

From a pure risk perspective, debt ratios of 0.4 or lower are considered better, while a debt ratio of 0.6 or higher makes it more difficult to borrow money. While a low debt ratio suggests greater creditworthiness, there is also risk associated with a company carrying too little debt.

Is 75% a good debt ratio?

A debt ratio below 0.5 is typically considered good, as it signifies that debt represents less than half of total assets. A debt ratio of 0.75 suggests a relatively high level of financial leverage, with debt constituting 75% of total assets.

Is 0.2 a good debt ratio?

Low debt ratio: If the result is a small number (like 0.2 or 20%), it means the company doesn't owe a lot compared to what it owns. This is usually a good sign. A lower debt ratio indicates a healthier financial position.