Debt Equity RatioD/E

The debt equity ratio measures how much of the business is financed by creditors compared with owners. The usual formula is long-term debt divided by shareholders' equity; some versions use total debt or total liabilities in the numerator, so the definition in the question should be followed.

A higher ratio means more leverage. Leverage can raise return on equity when the business earns more than the interest rate, but it also raises fixed interest obligations and the risk of default during downturns. A lower ratio means a stronger cushion for creditors.

Banks use the ratio heavily in credit appraisal, especially for term loans and project finance, where the borrower's own contribution (equity) relative to the loan is a key lending condition. A traditional benchmark for industrial projects is around 2:1 or lower, but acceptable levels vary by industry and bank policy.

The ratio does not apply in the same way to banks themselves, whose deposits are liabilities; for banks, leverage is judged through the capital adequacy and leverage ratios.

ऋण-स्वपुँजी अनुपातले व्यवसायमा साहु र मालिकको लगानी कति छ भन्ने तुलना गर्छ। सामान्य सूत्र दीर्घकालीन ऋण / शेयरधनी कोष हो; केही परिभाषामा कुल ऋण वा कुल दायित्व पनि प्रयोग हुन्छ।

उच्च अनुपातले बढी लिभरेज देखाउँछ: व्यवसायले ब्याजदरभन्दा बढी कमाए ROE बढ्छ तर स्थिर ब्याज दायित्व र जोखिम पनि बढ्छ। बैंकले आवधिक कर्जा र परियोजना वित्तमा ऋणीको आफ्नो लगानी (स्वपुँजी) र कर्जाको अनुपातलाई महत्त्वपूर्ण सर्तका रूपमा हेर्छ। बैंक आफैंको लिभरेज भने पुँजी पर्याप्तता र लिभरेज अनुपातबाट मापन हुन्छ।