Debt to Equity Ratio
Another leverage ratio used to evaluate the financial integrity of a business is the debt to equity ratio. It is strictly a bottom half balance sheet ratio. Its result explains the relationship of volume of debt and corresponding equity to finance the operations of a business, i.e. the purchase of assets. What is important to understand is that certain business sectors and their corresponding industries have well established relationships of debt and equity. Abnormalities with this relationship impact solvency and opportunity. For investors in business it is essential to not only understand this debt to equity relationship but also its effect on the income statement and value. A well learned investor can take advantage of this knowledge and unlock the door to financial success while
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