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What Is the Debt-to-Equity Ratio?
The debt-to-equity ratio measures how much debt a business uses relative to equity — a fundamental indicator of financial leverage and risk.
D/E Ratio = Total Debt / Total Shareholders' Equity
D/E Benchmarks by Industry
| Industry | Typical D/E Ratio |
|---|---|
| Technology / SaaS | 0.2–0.8× |
| Consumer goods | 0.5–1.5× |
| Manufacturing | 0.8–2.0× |
| Real estate | 1.0–3.0× |
| Utilities | 1.5–3.0× |
| Banking | 5–15× (regulated leverage) |
D/E Ratio and ROE
High leverage amplifies ROE through the financial leverage multiplier:
ROE = ROA × Financial Leverage
A business with 10% ROA and 3× leverage has 30% ROE. But the same leverage amplifies losses when ROA is negative.