Canonical formula calculator
DEBT TO EQUITY RATIO
How much of the business is financed by debt versus owner capital — the leverage test that most operators do not do until they need to.
Worked example
How the number is worked out
A haulage firm with two financed trucks and the owner’s own stake in the business.
Starting from
Working
A dollar twenty of borrowed money for every dollar of the owner’s. Debt is not a fault — it is what the trucks were bought with — but it is the share of the business that has to be serviced in a bad month as well as a good one.
What this tells you
Debt-to-Equity tells you how much of your business is financed by borrowed money versus owner capital. A ratio under 1.0 means more equity than debt — conservative. Between 1.0 and 2.0 is moderate leverage. Above 2.0 means debt outweighs equity, which increases both potential returns and risk.
When to use it
Calculate this when raising debt or equity, when considering whether to take on a new loan, or when evaluating your own risk tolerance. Lenders use this number heavily — they will assess whether you can support additional debt based on how leveraged you already are. Knowing your own ratio before walking into a bank is the difference between negotiating and getting evaluated.
What it doesn’t tell you
Debt-to-equity is a static snapshot. It does not tell you whether the debt is good debt (financing growth) or bad debt (covering losses), whether interest rates are sustainable, or whether equity is real (cash invested) or built up from retained earnings. Combine it with interest coverage and current ratio for a complete leverage and liquidity picture.
Reckon it, don’t just calc it
A calculator gives you today’s number. Reckon takes your plan to make your own money and checks it against what’s real — your margin, your price, what it takes to hit the take-home you want. No AI, no guessing — the same input always gives the same answer.