what does a debt to equity ratio of 1 5 indicate 
a debt to equity ratio of 1 5 would indicate that the company in question has 1 50 of debt for every 1 of equity to illustrate suppose the company had assets of 2 million and liabilities of 1 2 million since equity is equal to assets minus liabilities the company s equity would be 800 000 its debt to equity ratio would therefore be 1 2 million divided by 800 000 or 1 5 can a debt ratio be negative if a company has a negative debt ratio this would mean that the company has negative shareholder equity in other words the company s liabilities outnumber its assets in most cases this is considered a very risky sign indicating that the company may be at risk of bankruptcy the bottom linedebt ratio is a metric that measures a company s total debt as a percentage of its total assets a high debt ratio indicates that a company is highly leveraged and may have borrowed more money than it can easily pay back investors and accountants use debt ratios to assess the risk that a company is likely to default on its obligations 