D/E
Debt-to-Equity
Short definition
Debt-to-equity is financial debt over equity. It is a stock leverage measure; gross versus net and book versus market follow the contract and the analysis.
Detailed explanation
Market D/E is for WACC weights; book D/E is for covenants and thin-cap. Inflation shrinks historic equity and inflates the ratio.
Net debt/EBITDA is flow leverage; D/E is a stock. They need not tell the same story. IFRS 16 lease liabilities enlarge D.
Why it matters for the CFO
Target structure and bank limits hang on this ratio. The wrong denominator (goodwill-inflated equity) overstates capacity.
How it is calculated
D/E = finansal borç (veya net borç) / özkaynak
Lock numerator and denominator to the contract and the purpose. Mixing gross debt / market E breaks both covenant and WACC.
Variables in the formula
- D: gross or net financial debt (contract definition)
- E: book or market equity
How to read it
There is no universal healthy D/E; cash-flow stability, collateral and coupon load set it. When market E falls, the ratio explodes without new debt.
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Definitions are educational. They are not investment, credit or tax advice.