Ideal Debt Equity Ratio

Debt Equity ratio is perhaps the most important ratio when it comes to checking the creditworthiness of a company, it is calculated as Debt/ Equity. Banks give particular emphasis on this ratio when they have to decide whether to approve a loan or not to a company.

An ideal debt equity ratio for most of the companies is .50 that is for every 2 dollars of equity a company has 1 dollar of debt. However above ratio varies from industry to industry because some industries require more debt than others and therefore debt equity ratio of .50 is not ideal for such industries.

1 comment… add one
  • Akshay Kumar

    Can I know what is the ideal debt equity ratio for the banking industry in india….?

Leave a Comment

Related pages

traditional economy definition economicsdisadvantages and advantages of mixed economydiversifiable risk and nondiversifiable riskadvantages of demographic segmentationformula of profitability ratiodisadvantages of marginal costinginternational trade advantages and disadvantagesdifference between demat and trading accountwhat is the full form of swotwhat is the difference between shares and debenturesjournal entry for capital accountfeatures of monopolistic competition pptdescribe a traditional economymerits and demerits of globalisation in indian economythe bartering systemforex reserves of countrieswhat are vertical mergerseconomic profit is defined as the difference between revenue andexplain capmwhat are leverage ratiosexample of debit noteadvantages and disadvantages of skimmingdemand loansfifo advantagesadvantages & disadvantages of globalisationusefulness of the statement of cash flowsbundling pricing strategy examplesmerger disadvantagesmoney market hedge advantages disadvantagesdisadvantages of marginal costingstrengths of socialismdiscounting a billdisadvantages of a command economyexamples of marginal costingadvantages of venture capitalist3 golden rules of accountingdirect and indirect quote in forexconglomerate integrationdefine junk bondthe principle of absolute advantageindirect currency quotewhat does consignee meancapitalism merits and demeritswholesale banking definitionmarginal costing advantages and disadvantagesautocratic leaderformula for degree of operating leveragehow to record accrued revenuewhat are leverage ratioshorizontal analysis in accountingmixed economies advantages and disadvantagessystematic risk unsystematic riskurbanisation benefitsdeclining balance method of depreciationdefinition subventiondifference between bank overdraft and cash creditdebit card disadvantagesdefinition of redeemable preference sharesmerits of dictatorshipadvantages of monopolisticfree market economy advantages and disadvantagesnon diversifiable riskstrengths and weaknesses of traditional economyautocratic leadership style pdfdisadvantages of urbanizationdefinition of drawer and draweeplr rate of sbisupplementary goods economicsdifference between accounts receivable and accounts payabledefinition traditional economycapitalism and socialism differencesneft long formadvantages of conglomeratespros and cons definition wikipediaaman awasthiadvantages of capitalismdefinition of bearer chequemixed economy disadvantages