Debt-to-Equity Defender
The Debt-to-Equity Ratio (D/E) shows how much a company relies on debt compared to equity. Different industries require different leverage levels. Your mission: choose the ideal D/E using the slider!
How to Play: Read the scenario → adjust the slider → click Check → get instant feedback & score.
Understanding the Debt-to-Equity Ratio (D/E)
The D/E ratio measures how much of a company’s growth is financed by debt versus shareholder equity.
D/E Formula:
Debt-to-Equity = Total Debt ÷ Shareholder Equity
Why D/E Is Important
- Reveals financial risk
- Shows how aggressively a business uses debt
- Helps compare capital structures across industries
- Key ratio for long-term stability analysis
This game teaches the ideal D/E levels for different industries — a secret skill of smart investors.
❓ Frequently Asked Questions (FAQ)
- What does a high D/E ratio mean?
It means the company is relying more on debt than equity — higher financial risk.
- What is a safe D/E ratio?
It depends on the industry:
- Tech startups: low D/E
- Utilities & manufacturing: moderate D/E
- Banks: high D/E is normal
- Retail: balanced D/E
- Can D/E be negative?
Yes.
If equity is negative, D/E becomes negative — this is a major red flag.
- Why do banks have high D/E?
Banks borrow money (deposits) and lend it out — leverage is part of their business model.
- Does high D/E always mean bad management?
Not necessarily.
High D/E may be ideal for:
- Asset-heavy industries
- High-cash-flow businesses
- Businesses with strong competitive advantage
- What does this game teach beginners?
You learn:
- How to set ideal D/E for industries
- How leverage impacts financial risk
- Why D/E varies from sector to sector