Is 0.25 a good debt-to-equity ratio? (2024)

Is 0.25 a good debt-to-equity ratio?

Having said that, most experts believe a D/E ratio between 1.5 to 2.5 shows the company is financially stable. Taking the above examples, a D/E ratio of 0.25 is very good as it shows that the company is mostly funded by equity assets and has low obligations to repay.

What does a debt ratio of 0.25 mean?

A company's debt ratio can be calculated by dividing total liabilities by total assets. A debt ratio of more than 1.0 or 100% means that the company has more liabilities than assets, and a debt ratio of less than 1.0 or 100% means that the company has more assets than liabilities.

What is a 0.26 debt-to-equity ratio?

A low ratio of 0.26 means that the company is exposing itself to a large amount of equity. This is certainly better than a high ratio of 2 or more since this would expose the company to risk such as interest rate increases and creditor nervousness.

Is 0.28 a good debt-to-equity ratio?

Generally, a good debt-to-equity ratio is anything lower than 1.0. A ratio of 2.0 or higher is usually considered risky. If a debt-to-equity ratio is negative, it means that the company has more liabilities than assets—this company would be considered extremely risky.

Is 0.2 a good debt ratio?

Low debt ratio: If the result is a small number (like 0.2 or 20%), it means the company doesn't owe a lot compared to what it owns. This is usually a good sign. A lower debt ratio indicates a healthier financial position.

What does 0.35 debt ratio mean?

T o t a l d e b t r a t i o = T o t a l l i a b i l i t i e s T o t a l a s s e t s = 700 2 , 000 = 0.35. The total debt ratio of 0.35 indicates that the assets of a firm are financed with 35% of total debt.

What does a debt ratio of 0.2 mean?

On the other hand, suppose Company B has total liabilities of $200,000 and total assets of $1,000,000. The debt ratio for Company B is: Debt Ratio = $200,000 / $1,000,000 = 0.2 or 20% Company B has a lower debt ratio, indicating a more conservative financial structure with less risk.

What is a ideal debt to equity ratio?

Generally, 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, as some industries use more debt financing than others.

What is a reasonable debt to equity ratio?

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.

What is a bad debt to equity ratio?

The maximum acceptable debt-to-equity ratio for more companies is between 1.5-2 or less. Large companies having a value higher than 2 of the debt-to-equity ratio is acceptable. 3. A debt-to-equity ratio indicates that a company may not be able to generate enough cash to satisfy its debt obligations.

Is a 1.25 debt-to-equity ratio good?

Whether 1.25 is good largely depends on the industry in which the company operates. If you're in a capital intensive industry, then 1.25 may be considered a low debt to equity ratio. But if other companies don't have much debt, 1.25 might be high.

What is Tesla's debt-to-equity ratio?

Tesla Debt to Equity Ratio: 0.0744 for Dec. 31, 2023

View and export this data back to 2008.

Is 0.5 a good debt-to-equity ratio?

Generally, a lower ratio is better, as it implies that the company is in less debt and is less risky for lenders and investors. A debt-to-equity ratio of 0.5 or below is considered good.

Is a 0.3 debt ratio good?

Key Takeaways. Whether or not a debt ratio is "good" depends on the context: the company's industrial sector, the prevailing interest rate, etc. In general, many investors look for a company to have a debt ratio between 0.3 and 0.6.

What if debt-to-equity ratio is less than 1?

The debt to equity ratio shows a company's debt as a percentage of its shareholder's equity. If the debt to equity ratio is less than 1.0, then the firm is generally less risky than firms whose debt to equity ratio is greater than 1.0.

How much debt is OK for a small business?

How much debt should a small business have? As a general rule, you shouldn't have more than 30% of your business capital in credit debt; exceeding this percentage tells lenders you may be not profitable or responsible with your money.

What does a debt ratio of 0.75 mean?

It is discovered that the total assets number $124,000 while the liabilities are at $93,000. The debt ratio for the startup would be calculated as. $93,000/$126,000 = 0.75. That means the debt ratio is 0.75, which is highly risky. It indicates for every four assets; there are three liabilities.

What does a debt ratio of 0.5 mean?

If the calculation yields a result greater than 1, this means the company is technically insolvent as it has more liabilities than all of its assets combined. A result of 0.5 (or 50%) means that 50% of the company's assets are financed using debt (with the other half being financed through equity).

How much debt is ok?

Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%.

Is 0.6 a good debt ratio?

Interpreting the Debt Ratio

Broadly speaking, ratios of 60% (0.6) or more are considered high, while ratios of 40% (0.4) or less are considered low. However, what constitutes a “good debt ratio” can vary depending on industry norms, business objectives, and economic conditions.

What is a 1.25 debt ratio?

Business lenders virtually always require borrowers to have a debt-service coverage ratio higher than 1.00 (the minimum is typically closer to 1.25 — more on this below). This translates to a business being able to pay 100% of its debt payments at its current operating level and at the 1.25 level, with some cushion.

What does a debt-to-equity ratio of 0.80 mean?

The debt ratio measures the amount of debt for every dollar of assets. A debt-to-equity ratio of 0.8 means the firm has $0.80 of debt for every $1 of equity. A debt-to-equity ratio of 0.8 means the firm has 80 percent more debt than it does equity.

What debt-to-equity ratio do banks like?

What does a debt-to-equity ratio of 1.5 mean?

A debt-to-equity ratio of 1.5 would indicate that the company in question has $1.50 of debt for every $1 of equity. To illustrate, suppose the company had assets of $2 million and liabilities of $1.2 million. Since equity is equal to assets minus liabilities, the company's equity would be $800,000.

Is 2.5 a good debt-to-equity ratio?

The D/E ratio can vary as per the industry and various other factors that influence the company's performance. However, it is generally agreed that a debt-to-equity ratio between 1.5 to 2.5 indicates a financially stable company with a low risk profile.