 The debt-to-equity ratio tells us the proportional relationship of total liabilities to total equity. This ratio is a variant of the debt ratio. The debt-to-equity ratio is a measure of solvency. The debt-to-equity ratio is calculated as total liabilities divided by total equity. It tells us whether a company's assets are financed more by debt or by equity. When this ratio is greater than one, it means that the assets are financed more with debt. When this asset is less than one, it means the assets are financed more with equity. Here is the liability and equity section of the balance sheet. We'll use the total liabilities and total stockholders' equity to determine the debt-to-equity ratio. For 2015, total liabilities divided by total equity gives us a debt-to-equity ratio of 0.63. For 2016, total liabilities divided by total equity gives us a debt-to-equity ratio of 0.23. This company has elected to finance more assets with equity rather than debt. Although this is a less risky means of financing, it is more costly.