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Is the company's market-to-book ratio meaningful? is its book debt-equity ratio meaningful? explain

Sagot :

Because the book value of equity is negative in this case, Clorox's market-to-book ratio and its book debt-equity ratio are not meaningful. Its market debt-equity ratio may be used in comparison.

What is debt-equity ratio?

The debt-to-equity ratio is a financial metric that shows how much debt and shareholder equity were utilized to finance the assets of a company. The ratio, often known as risk, gearing, or leverage, is closely related to leveraging. The debt-to-equity (D/E) ratio demonstrates how much equity and debt are being used by a company to finance its assets. The D/E ratio indicates the capacity of shareholder equity to pay creditors in the case of a corporate downturn. Debt to Equity Ratio = Total Debt / Shareholder Equity is a quick formula. Long formula: Shareholders' equity / (short term debt plus long term debt plus fixed payment obligations).

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