A financial ratio that measures a company's total debt relative to its shareholders' equity, calculated by dividing total liabilities by total equity. It indicates how much debt a company uses to finance its assets compared to equity financing.
Compound term from Middle English 'dette' (something owed) and Latin 'aequitas' (fairness, equal value). The ratio concept emerged in early 20th century financial analysis as investors needed standardized ways to compare company leverage across different industries.
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