The debt to equity ratio is the ratio of how much a business owes (debt) compared to how much the owners have invested (equity).
This Excel debt to equity ratio calculator, available for download below, is used to compute debt to equity by entering details relating to the debt and owners equity.
The debt to equity ratio calculation is carried out by dividing the total debt of the business by the owners equity using the debt to equity formula as follows:
Both debt and equity are found on the balance sheet of the business.
There is no correct value for the debt to equity ratio as it depends on the industry in which the business operates. It is useful to compare the calculated figure with other businesses in your industry using figures available from published financial statements.
Using the Debt to Equity Ratio Calculator
The Excel debt to equity ratio calculator, available for download below, is used as follows:
- The value of debt is entered. Debt is found on the balance sheet of the business, and includes all borrowings, loans and overdrafts from banks and financial institutions less any cash.
- The value of owners equity is entered. The owners equity value is found on the balance sheet. Owners equity includes any capital plus retained earnings of the business. The debt to equity ratio calculator calculates the debt to equity ratio.
Debt to Equity Ratio Calculator Download
The debt to equity ratio spreadsheet is available for download in Excel format by following the link below.
Provided cash and profits are managed correctly, a high debt to equity ratio business will give greater returns to the equity holders. However, when losses are incurred, the people who lent money to the business see a high debt to equity ratio as an indicator of a highly geared and therefore more risky business.
A lending institution would not normally lend more than the owners of a business, so the maximum debt to equity ratio is normally 1 and usually the lender would seek a lower figure in the region of 0.5 – 0.6.
Users use this debt to equity calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of an accounting tool that you might use to calculate debt to equity ratio. It is purely illustrative. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this debt ratio calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.