Certified Fraud Examiner Practice Exam 2026 – All-in-One Guide to Master Your Certification!

Question: 1 / 400

How is the Debt to Equity Ratio calculated?

Total Revenue/Total Assets

Total Liabilities/Total Equity

The Debt to Equity Ratio is calculated by taking total liabilities and dividing them by total equity. This ratio provides insight into the financial leverage of a company, indicating the relative proportion of shareholders' equity and debt used to finance a company's assets. A higher ratio suggests a greater reliance on debt financing, which may imply higher financial risk, while a lower ratio indicates a more conservative approach with less reliance on borrowed funds.

This calculation is essential for analysts and investors as it helps assess a company's financial stability and risk profile. Understanding this ratio assists in making informed decisions regarding investment and evaluating a company's capital structure.

Get further explanation with Examzify DeepDiveBeta

Total Assets/Total Liabilities

Total Equity/Total Revenue

Next Question

Report this question

Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy