A low figure shows the company has good financial standing. Financial experts generally consider a debt-to-equity ratio of one or lower to be superb. Because a low debt-to-equity ratio means the company has low liabilities compared to its equity , it's a common characteristic for many successful businesses.
A 0.5 D/E ratio is good in the sense that the company has more equity than debt financing. This suggests lower risk for creditors and investors. However, it might also indicate the company is missing out on potential growth opportunities that debt financing can provide.
Generally, a good debt-to-equity ratio is anything lower than 1.0. A ratio of 2.0 or higher is usually considered risky.
Typically, it's better to have a debt-equity ratio that's lower than 2.0 if possible. It's even more favourable to achieve a debt-equity ratio lower than 1.0. Generally speaking, the lower a company's debt-equity ratio is, the better its financial standing may be.
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.
For lenders and investors, a high ratio (typically above 2) typically means a riskier investment because the business might not be able to make enough money to repay its debts.
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.
Amazon debt/equity ratio for the quarter ending September 30, 2024 was 0.21. Amazon average debt/equity ratio for 2023 was 0.36, a 14.29% decline from 2022. Amazon average debt/equity ratio for 2022 was 0.42, a 10.53% decline from 2021. Amazon average debt/equity ratio for 2021 was 0.38, a 2.56% increase from 2020.
Tesla (TSLA) Debt to Equity Ratio: 0.11. The debt to equity ratio for Tesla (TSLA) stock is 0.11 as of Friday, January 10 2025. It's worsened by 15.72% from its 12-month average of 0.10. The debt to equity ratio is calculated by taking the total debt and dividing it by the shareholder equity.
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 because some industries use more debt financing than others. Capital-intensive industries like the financial and manufacturing industries often have higher ratios that can be greater than 2.
Debt-to-Equity Ratio
A higher ratio indicates a greater reliance on debt and higher potential financial risk. A healthy debt-to-equity ratio varies across industries, but as a general rule of thumb, a ratio above 2:1 is considered excessive debt.
In general, there is no single “ideal” debt to equity ratio, as it can vary depending on the industry, the company's stage of development, and its specific circumstances. However, many analysts suggest that a good debt to equity ratio of 2:1 or less is generally considered healthy for most companies.
A bad debt ratio is generally considered to be one that indicates a level of debt that may jeopardize the financial stability of the company. Typically, a debt ratio is considered high or bad when it exceeds industry benchmarks. Generally, ratios above 0.6 are considered bad.
On the other hand, a low debt-to-equity ratio indicates that a company is using primarily equity to fuel growth and fund operations, meaning they have a lower risk profile because they have fewer debts to repay.
Lower Cost of Capital: Debt often has a lower cost of capital compared to equity, especially for a highly creditworthy company like Apple. By issuing debt, Apple can take advantage of this lower cost to finance projects, acquisitions, and other capital expenditures without diluting shareholder equity.
Netflix's operated at median debt / equity of 114.3% from fiscal years ending December 2019 to 2023. Looking back at the last 5 years, Netflix's debt / equity peaked in December 2019 at 215.9%. Netflix's debt / equity hit its 5-year low in December 2022 of 81.5%.
Google (GOOGL) Debt-to-Equity : 0.09 (As of Sep. 2024)
Total debt on the balance sheet as of September 2024 : $106.62 Billion USD. According to Apple's latest financial reports the company's total debt is $106.62 Billion USD. A company's total debt is the sum of all current and non-current debts.
The average D/E ratio of major companies in the U.S. airline industry was between 5-6x in 2021, which indicates that for every $1 of shareholders' equity, the average company in the industry has more than $5 in total liabilities.
Debt-to-equity ratio values tend to land between 0.1 (almost no debt relative to equity) and 0.9 (very high levels of debt relative to equity). Most companies aim for a ratio between these two extremes, both for reasons of economic sustainability and to attract investors or lenders.
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.
Acceptable Range. For most companies, an acceptable debt-to-equity ratio falls between 1.5 and 2. Larger companies can sometimes sustain a higher ratio. However, a ratio much above 2 can indicate that the company is taking on too much debt, which could be risky.
For real estate investment companies, including real estate investment trusts (REITs), the average debt-to-equity ratio tends to be around 3.5:1.
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.