Definition
Debt to equity compares total debt to total equity to show how leveraged a balance sheet is.
Formula
Debt to equity = total debt / total equity
Example
Total debt $2M and equity $4M gives D/E = 0.5.
How to use it
- Track trends over time rather than a single snapshot.
- Compare to peers with similar growth and cash flow profiles.
Common mistakes
- Using book equity without noting large fair value adjustments.
- Comparing companies with very different revenue visibility.
Why this matters
This term matters because cash timing and risk are usually the difference between a plan that works on paper and a plan that survives. Use consistent definitions so decisions are comparable over time.
Practical checklist
- Write a 1-line definition for "Debt to Equity (D/E)" that your team will use consistently.
- Keep the time window consistent (weekly/monthly/quarterly) when comparing trends.
- Segment results (channel/plan/cohort) before drawing big conclusions from blended averages.
- Sanity-check with a related calculator from the same category on MetricKit.
- Read the related guide (e.g., Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs) for context and common pitfalls.
Where to use this on MetricKit
Calculators
- IRR Calculator: Estimate internal rate of return (IRR) for an investment using yearly cash flows.
- Discounted Payback Period Calculator: Estimate discounted payback period using a discount rate (and compare to simple payback).
- Cash Runway Calculator: Estimate runway from cash balance, revenue, gross margin, and operating expenses (optionally with revenue growth).
- Break-even Pricing Calculator: Compute contribution margin, break-even units, and profit at a given volume based on price and variable costs.
- DCF Valuation Calculator: Estimate enterprise value using a simple DCF: forecast cash flows, apply a discount rate (often WACC), and add a terminal value.
Guides
- Fundraising & valuation hub: pre/post-money, SAFEs, notes, and liquidation prefs: A practical hub for startup fundraising and valuation basics: pre/post-money, pro rata, option pool shuffle, SAFE/note conversion, and liquidation preference outcomes.