Debt-to-Equity Ratio
Definition
Total liabilities divided by shareholders equity, showing how much of the business is funded by creditors against owners. A higher ratio raises returns when trading well and magnifies losses when it does not.
Related Terms in Financial Analysis
EBITDA
Earnings before interest, taxes, depreciation and amortisation: a proxy for operating cash generation that strips out financing and accounting policy choices. Widely used in valuation, but it is not a GAAP or IFRS measure and ignores both capital spending and working capital.
Operating Income
Profit from core trading activity: gross profit less operating expenses, before interest and tax. Also called operating profit or EBIT, it isolates how well the business performs independently of how it is financed.
Net Income
The final profit figure after every expense, including cost of sales, operating costs, interest and tax. Also called net profit or the bottom line, and the figure that flows into retained earnings.
Gross Margin
Gross profit as a percentage of revenue, calculated as revenue less cost of goods sold divided by revenue. It measures how much of each sale survives direct costs and is the first place to look when pricing or supplier costs move.
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