BusinessWeek Image: “Raising Capital: Equity vs. Debt ” (source below)
Successful businesses must have enough capital to weather economic downturns, but the sources of this capital differ between companies and can determine how long an organization can survive in times of slow market activity. Some businesses have financed their business largely through the equity of their owners or investors, and other businesses are mostly financed by debt, or loans from lending institutions. Taking a look at the debt to equity ratio can give the owner insights into the financial standing of the business.
What is the debt/equity ratio?
It’s a measure of how much of a business’ assets are leveraged by debt (loans that the business will have to repay) compared to equity (capital that exists inside the business from owners or investors in the business). Math
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