Definition

The debt to equity ratio is measure of leverage. It shows how much debt a company has relative to it's equity. Meaning, the debt-to-equity ratio shows how much debt a company is taking on in order to run its operations opposed to using its own funds.

How is the Debt to Equity ratio calculated?

Debt to Equity = Total Liabilities/Total Shareholders' Equity

Why is this important?

The debt to equity ratio indicates how risky an investment into a specific company may be. Usually the higher the debt to equity ratio the more risky an investment in a company may be.