The debt to equity ratio is a health factor. It determines a companies financial leverage by comparing its total liabilities to its total equity. A low debt to equity is preferential and a higher value generally indicates higher risk to investors.
The total liabilities or total debt is a combination of long and short term debt, which can be found on the balance sheet. Similarly, shareholder’s equity is a balance sheet entry and it is firms total assets minus total liabilities. Shareholder’s equity are the funds remaining if the company were to liquidate their assets and pay their creditors. It represents the proportion of the business which wasn’t financed with debt.