Debt to Equity Ratio
Calculate the debt to equity ratio, a solvency ratio that measures the proportion of a company’s equity that is financed by debt. This ratio is also known as the Gearing Ratio.
The debt to equity ratio, for short the D/E ratio, indicates the relative contribution of debt and equity to a company’s capital structure. It helps assess the level of financial risk a company carries due to its debt obligations. A higher ratio implies a higher reliance on debt to finance the business, which could increase risk but also potentially lead to higher returns for shareholders.
The formula is as follows:
\[\text{Debt to Equity Ratio} = \text{Total Debt} / \text{Total Equity}\]The debt to equity ratio is compared within an industry, since utilities, real estate and companies with a financing arm (car makers, machinery makers) carry far more debt than software companies. Equity is a book value, so large buybacks or accumulated losses can make it small or negative, and the ratio then becomes extreme or negative without saying anything about the debt load; the debt to capital ratio (get_debt_to_capital_ratio) and net debt to EBITDA (get_net_debt_to_ebitda_ratio) are more robust in those cases.
Also known as: D/E ratio, leverage ratio, gearing ratio.
Debt to Equity Ratio in Python or via the MCP
Install the Finance Toolkit with:
pip install financetoolkit -U
Then call get_debt_to_equity_ratio as shown below.
from financetoolkit import Toolkit
toolkit = Toolkit(
["CAT", "DE", "CNH"],
api_key="FINANCIAL_MODELING_PREP_KEY",
start_date="2021-01-01",
end_date="2025-12-31",
)
toolkit.ratios.get_debt_to_equity_ratio()
Or, after setting up the Finance Toolkit MCP, ask:
How much debt did Caterpillar, Deere and CNH Industrial carry per dollar of equity from 2021 to 2025?
Which returns:
| 2021 | 2022 | 2023 | 2024 | 2025 | |
|---|---|---|---|---|---|
| CAT | 2.288 | 2.3279 | 1.9422 | 1.9703 | 2.0326 |
| CNH | 4.5462 | 3.3243 | 3.3897 | 3.4969 | 3.4548 |
| DE | 2.6435 | 2.5643 | 2.9102 | 2.8555 | 2.4584 |
Parameters
get_debt_to_equity_ratio accepts the following parameters.
| Parameter | Type | Description | Example |
|---|---|---|---|
rounding | int | None | The number of decimals to round the results to. Defaults to None, which uses the rounding of the Toolkit (4 unless set otherwise). | 2 |
growth | bool | Whether to calculate the growth of the ratios. Defaults to False. | True |
lag | int | list[int] | The lag to use for the growth calculation. Defaults to 1. | 4 |
compound | bool | Whether the growth is the compound annual growth rate over the lag (e.g. lag=5 for the five-year CAGR) instead of the total change. Defaults to False. | False |
standardize | bool | Whether to standardize (Z-Score) the result. When combined with growth=True, standardizes the growth values instead of the raw values. Defaults to False. | True |
trailing | int | The number of periods to sum flows (income and cash flow statement items) over, with balance sheet items averaged over the same number of period ends. E.g. 4 with quarterly data gives the trailing twelve months (TTM) and 3 with annual data a three-year cumulative figure. Defaults to None, which uses single-period flows (per quarter and not annualized with quarterly data). | 4 |