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DEBT-TO-EQUITY RATIO

Published on June 17, 1999

Ottawa Business Journal; Published on February 22, 2011

1. Total liabilities divided by total shareholders' equity. This shows to what extent owner's equity can cushion creditors; claims in the event of liquidation.

2. Total long-term debt divided by total shareholders' equity. This is a measure of LEVERAGE-the use of borrowed money to enhance the return on owners' equity.

3. Long-term debt and preferred stock divided by common stock equity. This relates securities with fixed charges to those without fixed charges.

A ratio that measures a company's financial LEVERAGE. It is calculated by dividing all debt (both short- and long-term) by all equity capital, including preferred and common stocks, earned and unearned surplus, and surplus reserves.

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