Understanding Rajan Company's Debt-To-Equity Ratio

Understanding Debt-To-Equity Ratio:

Debt-to-equity (D/E) ratio compares a company’s total debt to its total equity and can be used to evaluate how much leverage a company is using.

The Debt-to-equity ratio is calculated using the formula:

Debt-to-equity ratio = Total debt (or liabilities)/Total equity.

Rajan company's most recent balance sheet reported total liabilities of $0.8 million and total equity of $1.1 million.

Debt-to-equity ratio = $800,000 / $1,100,000 = 0.73.

Therefore, Rajan Company's debt-to-equity ratio is 0.73, indicating that the company has $0.73 in debt for every dollar of equity.