Create a New Budget with QuickBooks 2012 Set Up Budgets Window
Work with Existing Budgets in QuickBooks 2012
Ratio Analysis and QuickBooks 2012

Debt Equity Ratio in QuickBooks 2012

The debt equity ratio is one of the leverage ratios you can use in QuickBooks 2012. A debt equity ratio compares a firm’s long-term debt with a stockholder’s equity or owner’s equity. Essentially, the debt equity ratio expresses a firm’s long-term debt as a percentage of its owner’s equity.

Stockholder’s equity is synonymous with owner’s equity and, in the case of a sole proprietorship, with a sole proprietor’s capital account.

The following is the formula used to calculate a debt equity ratio:

long-term debt/stockholder’s equity
A Simple Balance Sheet
Cash $25,000
Inventory 25,000
Current assets $50,000
Fixed assets (net) 270,000
Total assets $320,000
Accounts payable $20,000
Loan payable 100,000
Owner’s equity
S. Nelson, capital 200,000
Total liabilities and owner’s equity $320,000

By using the example balance sheet shown, you can calculate the debt equity ratio by using this formula:


This formula returns the debt equity ratio of 0.5. Therefore, this firm’s long-term debt equals 0.5, or 50 percent of its owner’s equity.

You simply compare your debt equity ratio with the debt equity ratios of other, similar-sized firms in your industry. As is the case with the debt ratio, the less long-term debt you carry, the better — all other things being equal.

  • Add a Comment
  • Print
  • Share
blog comments powered by Disqus
The Logic of Economic Value Added Analysis
Electronically Sending the Accountant's Copy of the QuickBooks 2012 Data File
Gross Margin Percentage Ratio and QuickBooks 2012
Export Client Changes from the QuickBooks 2012 Data File
Debt Ratio in QuickBooks 2012