The debt-to-equity ratio is a measure of a corporation's financial leverage, and shows to which degree companies finance their activities with equity or with debt. It is calculated by dividing the total amount of debt of financial corporations by the total amount of equity liabilities (including investment fund shares) of the same sector. Debt is the sum of the following liability categories: currency and deposits; debt securities; loans; insurance, pension and standardised guarantee schemes; and other accounts payable. On the denominator side, the equity is represented by the market value of the shares, including investment fund shares, issued. The financial corporations sector (S12) includes all private and public entities engaged in financial activities. If the ratio is 2.5, for example, it means that the outstanding debt is 2.5 larger than the market value of the outstanding equity.
Financial corporations debt to equity ratio
The debt-to-equity ratio is a measure of a corporation's financial leverage, and shows to which degree companies finance their activities with equity or with debt.
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