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.
All interest-bearing obligations — bank loans, lines of credit, bonds, long-term debt. Excludes operational accounts payable.
Owner capital plus retained earnings minus accumulated losses. Can be negative if the business has lost more than its capital base.
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Optional — helps us match this calculation against relevant case studies (coming soon).
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.
Coming soon
Cases, plays, and benchmarks for this metric will appear here as the Moonshot knowledge libraries grow. For now: log in to track your number over time and Moonshot will surface trend warnings when the substrate fills in.