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Debt to Equity Ratio

Provided by the International Finance Corporation


This ratio measures the extent to which the owners' equity (including retained earnings) is available to fund the debts of the business. It is usually considered less risky if the majority of business debts are funded by owners’ equity instead of debt. That means a lender or potential investor would want to see this ratio as low as possible. An acceptable level in most industries would be around 0.5:1 or lower.

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The material in this work is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law.  IFC does not guarantee the accuracy, reliability or completeness of the content included in this work, or for the conclusions or judgments described herein, and accepts no responsibility or  liability for any omissions or errors (including, without limitation, typographical errors and technical errors) in the content whatsoever or for reliance thereon.

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