This glossary uses Visual Finance™ to bring financial terms to life. Each example shows data from the Round Number Company, a fictional business with simplified figures to make learning easier. For more details, visit 'How to Read Visual Finance'.
Ratio: Liabilities divided by Equity.
Example: The Round Number CompanyTotal Liabilities = 160; Equity = 140 Debt-to-Equity = 160/140 = 1.14 |
This ratio is a measure of the company’s safety, or ability to withstand adversity. This is a real What do you mean by that? term. What is meant by ‘debt'? Total Liabilities? Interest-bearing debt? Long-term debt? See the discussion at Debt.
See also the discussion at Leverage.
The above is our generic explanations of common corporate financial terminology. Actual meanings can vary widely from company to company; in order to have the correct internal definition you need to ask your Finance Department, "What do you mean by that?"
term list.