How to Calculate the Debt to Equity Ratio, With Sector Medians

How do you calculate the debt to equity ratio?

The debt to equity ratio divides a company's total debt by its shareholders' equity. Both numbers come from the balance sheet. A ratio of 0.5 means the company carries 50 cents of debt for every dollar that belongs to its shareholders.

Debt to equity ratio = total debt / shareholders' equity

Total debt means borrowed money: bank loans and bonds, short term and long term. Shareholders' equity is what is left when you subtract all liabilities from all assets.

A simple example with made-up numbers

Picture a small made-up business with 40 dollars of loans for every 100 dollars of equity. The ratio is 40 / 100 = 0.40. If it borrows another 60 dollars, debt rises to 100 and the ratio climbs to 1.00. Debt now equals everything the owners have put in and kept.

What the number tells you

A low ratio means the company is financed mostly by its owners. It has room to borrow in a bad year. A high ratio means lenders carry a large part of the business. Interest has to be paid in good and bad years, so profits swing more.

Debt is not bad in itself. A utility with steady income from regulated prices can carry far more debt than a young software company whose sales may drop. That is why the ratio only makes sense next to companies in the same sector.

Debt to equity ratio by sector: the medians in our database

These are the sector medians from the Fair Value Calculator database as of October 20, 2026, across all stocks in our database with a reported ratio. Half of the stocks in each sector sit below the median. For these medians, debt means long-term borrowings from the latest annual balance sheet; short-term borrowings and leases are not included, so the figures run a little below a full total-debt ratio.

• Information Technology: 0.06
• Health Care: 0.08
• Communication Services: 0.09
• Consumer Discretionary: 0.09
• Consumer Staples: 0.10
• Materials: 0.10
• Industrials: 0.12
• Energy: 0.25
• Financials: 0.26
• Real Estate: 0.43
• Utilities: 0.66

The highest sector median is about 12 times the lowest. A ratio of 0.40 would be high for a technology company and low for a utility. The full table with quartiles and 177 industries is on our page debt to equity ratio by industry. The values move every day.

How to judge a debt to equity ratio in three steps

1. Compare within the sector. A ratio below the sector median is low for that sector. A ratio well above the upper quartile deserves a closer look.
2. Check that equity is positive. If equity is negative, for example after large buybacks or years of losses, the ratio has no meaning. Our analysis shows this case separately instead of a number.
3. Look at the cash. A company with a lot of cash next to its debt is safer than the ratio alone suggests. Net debt, which is debt minus cash, tells you more.

Check a stock yourself

Type any company into the free Fair Value Calculator to see its balance sheet next to its sector and its fair value. To browse a whole sector, open for example Utilities stocks or Information Technology stocks. You can also work the ratio out by hand with the debt to equity ratio calculator.

A low debt to equity ratio alone does not make a stock a good buy. It is one signal among several. Not financial advice.