The balance sheet provides accountants with a snapshot of a company’s capital structure. One of the most important measures of capital structure is the debt-to-equity (D/E) ratio.
It's calculated by dividing debt by equity. The debt-to-equity ratio would be two to one if a company has debt equal to $100,000 and equity equal to $50,000. The debt-to-equity ratio shows how much a business is leveraged: how much debt it's using to finance operations rather than its internal funds.
