Debt to equity ratio is also called Risk ratio. It is a measure of company’s ability to repay its obligations.
Optimal D/E is to be 1. For most firm’s maximum D/E is between 1.5 and 2.
D/E = Debt (liabilities)/Equity
Debt to equity ratio = Total liabilities / Stockholders’ equity
Debt to Equity Ratio = (Short term debt + Long term debt + Fixed payment obligations) / Shareholders’ Equity