ShmoopTube

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Finance allah shmoop shmoop What is the debt to equity

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ratio or duras It is named in insane asylums all

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over the world Well it's a balance sheet computation that

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tries very roughly to measure how efficient a company is

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using its precious capital resource is the numerator comprises long

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term liabilities on ly For most companies with debt the

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amount of long term debt vastly outweighs the short term

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So they ignore the short The denominator is the company's

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shareholder's equity Easy You know that computation right ale and

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think that's the capital invested in the business that's what

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Isthe so what does it mean to have a high

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durer Well if shmoop a loops llc a producer of

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the most delicious cereal on the planet has four billion

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dollars of debt And on lee fourteen dollars of equity

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will you don't have to be a wall street genius

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to get that that's bad right Tons of debt almost

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no equity It means that loans comprise some ninety nine

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percent of the company and well that it is essentially

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owned by the bank and other creditors not by the

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equity stake holders And you want steak Flip things around

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Your cisco networks with a billion dollars of debt and

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like fifty billion dollars of equity Well the shareholders clearly

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owned this company The size of the equity dwarfs the

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size of the debt Got it Bottom line High ratio

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bad low ratio Good at least if you're one of

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the owner investors But if you're a banker with a

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hankering to own a cereal company well then today you 00:01:33.338 --> [endTime] might be able to just take one over girls

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