What is an acceptable result for the debt to equity ratio?

The debt to equity ratio is a financial metric that compares a company's total liabilities (debt) to its shareholders' equity. It reflects the proportion of debt and equity used to finance the company’s assets, indicating the risk level of the business in terms of its financing structure.

An acceptable result for the debt to equity ratio can vary significantly depending on the industry sector and the financial strategy of the company. However, a ratio below 100% typically suggests that a company is using more equity than debt to finance its operations, which may indicate a lower financial risk. When the ratio is below 100%, it means that for every dollar of equity, less than a dollar is owed in debt, making the company less reliant on borrowed funds.

A result above 100% would imply that the company has more debt than equity, which could raise concerns about its financial stability and increase risk for investors and creditors. Meanwhile, a ratio of exactly 100% would indicate a balance between debt and equity, but it signals that the company is equally leveraged, which could also be viewed as a heightened risk depending on the context. Thus, the option indicating a result below 100% is favorable, as it suggests a more conservative financial position and less reliance on debt financing